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As much as it may feel good to see plenty of analysts and investors agree with you, value investors often thrive by buying into skepticism and waiting for market sentiment to shift their way. To that end, I don't mind that many Wall Street analysts seem fairly lukewarm on 3M (NYSE: MMM). Although this conglomerate certainly has some near-term challenges, patient investors should look at this as an opportunity to buy undervalued shares in one of the best-run global giants.

Plenty Of Challenges For 2012

3M shares took a beating in the middle of 2011 as company earnings and guidance disappointed the Street and institutional investors fled in search of better near-term growth stories. To be sure, 3M's prosperity is tied to the health of the overall global economy and 3M tends to be more short-cycle oriented than comparables like Illinois Tool Works (NYSE: ITW) or DuPont (NYSE: DD). With investors not especially optimistic on global growth in 2012, it stands to reason that expectations for 3M are not as strong.

3M is also challenged by ongoing troubles in the optical films business. The LCD market has been poor for a little while now, as retailers struggle to move TVs, monitors, or frankly much of anything with a screen that doesn't have the Apple logo stamped on it. This business is about 7% of the company's profits and recent guidance from Corning (NYSE: GLW) doesn't suggest a big turnaround anytime soon. Even 3M management is relative sober on this business – not expecting much of a turnaround in the larger electronics business until mid-2012.

There are also some structural concerns for investors to consider. For starters, 3M maintains an antiquated and counter-productive policy of mandatory retirement and the current CEO will hit that in 2012. 3M is also bumping up against some capacity constraints and will likely be lifting capex spending for at least the next two years. While 3M's long history of excellent returns on capital make these wise investments, they do depress free cash flow in the short term.

Plenty To Like Longer-Term

Although the loss of CEO Buckley will impact the company beyond 2012, the net balance of 3M's strengths and weaknesses looks quite favorable beyond 2012.

For starters, this is one of the most internationally-diversified major conglomerates. With only about one-third of sales coming from North America and a similar amount coming from growth regions like Latin America and Asia, 3M should be better-positioned for above-average growth than rivals like Illinois Tool Works (42% of sales from the U.S.), Honeywell (NYSE: HON) (48% of sales from the U.S.), and Danaher (NYSE: DHR) (49% of sales from the U.S.).

3M is also an exceptionally diverse collection of businesses. While various adhesives make up the largest single sales category, 3M is active in markets as diverse as orthodontics, touch screens, traffic lights, and electronic cabling. Though analysts currently seem a bit sour on 3M's relatively large exposure to consumer and small business, that seems like a good position to be in as global standards of living rise.

Last and not least, while 3M is not shy about making selective acquisitions, the company does not depend on them for growth to the same extent as many large industrial concerns. Instead, 3M has a thriving internal product development process, with more and more attention going towards products for technology markets.

The Bottom Line

The generally poor performance of industrial conglomerates in 2011 means that investors have plenty of choices for their investment dollars. General Electric (NYSE: GE), Siemens (NYSE: SI), Emerson (NYSE: EMR), and ABB (NYSE: ABB) are all worth serious consideration right now as undervalued global industrial plays. Yet, 3M does stand out both for its long history of excellent returns on capital (even though the recent recession) and its broad exposure across borders, industries, and customers.

Even assuming a slight slowdown in revenue growth from historical trends and a flat free cash flow margin, 3M shares meet my 20% undervalued hurdle for an investment of this type. Bolstering this undervaluation is quite a bit of skepticism regarding 3M's ability to grow and cut costs, a skepticism that arguably makes it more likely that 3M will surprise (positively) than disappoint. Although 3M is hardly a pick for the get-rich-quick crowd, it looks like a very solid dividend-growth play at a very reasonable price.

Disclosure: I am long MMM.