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Tom Armistead
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I'm a well-informed retail investor and post on SA in order to expose my thought process to critical examination and comment from readers. It makes me a better investor. I'm particularly proud of bullish macro articles posted in 2009 and later, in which I presented ideas that encouraged me to... More
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Tom Armistead's Instablog
  • GS Downgrades MMM to Sell: This is a Buying Opportunity 0 comments
    Jan 11, 2012 9:48 AM | about stocks: MMM

    It came as a surprise today when GS downgraded MMM to sell, with a price target of $87.
    With GS, there is always the question of whether this is a misdirection, intended to move the stock for the benefit of their clients, who will buy on the predictable dip. Or whether it is something deeper, with certain clients victimized in order to create profits for others who are farther up the ladder of privileged access. Doing God's work, with GS it is very hard to tell who, if anyone, has been admitted to the inner circle of light.

    None of this changes my opinion on the stock. I see a price target of $95, by the end of the year. That's a midpoint target, based on my projected 5 year average EPS, which currently stands at 5.47. Applying a historical average multiple of 17.5 on this metric, I arrive at the $95 target. It should be noted that if I leave out the values from the panic in 2008 and 2009, the average multiple would be higher.

    Right now I'm long MMM Jan 2013 70.0 calls, and short Apr 2012 90.0 calls. Now would be a good time to add to that position: I plan to buy a few more of the LEAPS and wait for the stock to appreciate before selling any additional covered calls.

    Themes: Industrials, Options Stocks: MMM
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