Marc Chaikin's Buy The Dip Stock Pick Just Made A Golden Cross

In a recent Benzinga exclusive interview, veteran investor Marc Chaikin said that he is steering away from the mega caps in 2024.

The founder and CEO of Chaikin Analytics pointed to potential opportunities outside the tech sector, one of which was 3M Co MMM. 2023 hasn’t been the best year for 3M’s stock. The stock declined by more than 10% on business-specific headwinds.

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The Saint Paul, Minnesota-based company remains entangled in several legal disputes for providing ineffective earplugs to the military – a potential reason for the stock’s anchoring. However, Chaikin sees “a lot of upside” on 3M’s stock chart:

"Look at the chart on 3M and the double top at the $200 area in 2019 and 2022. The stock is currently trading with a 5.5% dividend yield at $110 — that's a lot of upside," he said at the interview.

Citing the company’s Post-It-Note innovation as an example, Chaikin believes that 3M always has continued potential to innovate some new product to drive its top line.

The stock’s moving averages just made a Golden Cross on the technical charts, signaling a potential bullish turn-of-events for the company. The 50-day SMA crossed over the 200-day SMA on Jan. 10.

3M Company faced significant pre-tax charges in the past two quarters due to settlements related to major lawsuits, namely PFAS and earplugs. However, there is optimism that these legal issues are nearing resolution, and the associated payments will be spread over several years.

The company is prioritizing the reduction of litigation risks, enhancing operational efficiencies, undertaking a non-core spin-off, and capitalizing on robust free cash flow. 3M is, thus, expected to recover well, leveraging its strong free cash flow to cover the fines and potentially increase dividends in the future.

Moreover, 3M is a well-known dividend stock. With a history of 65 years of paying and growing dividends, the stock currently sports a good 5.54% forward yield.

3M stock valuations are currently attractive, too. The stock trades at an 11.88 P/E (FWD) relative to a sector median of 18.71. The Golden Cross made infuses further confidence that the transformation may now be taking the desired effect.

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Image: ChaikinAnalytics/Pixabay