Foolish Four Portfolio
By
Cleaning Up With 3M
RESTON, VA (September 13, 1999) -- Once the laggard of the Foolish Four, 3M <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMM)") else Response.Write("(NYSE: MMM)") end if %> has been surging ahead in recent weeks. Did I find the reason at Costco <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COST)") else Response.Write("(Nasdaq: COST)") end if %>?
3M is a company dedicated to innovation -- and I think they've done it again. As Chris Rugaber reported several months ago, 3M was coming out with a new product that just might be "the next Post It." It's a cleaning cloth.
I must admit that the description didn't exactly blow me away. But when I saw the new Scotch-Brite cleaners at Costco, I bought them, in the interest of research.
I'm not the domestic type, so things like this don't usually get me excited, but wow, now I am blown away. I love those things. Little 13 x 15 inch squares (OK, rectangles) of soft cloth that clean with just a wipe. That's it. No sprays, no water -- just wipe and the glass is clean. Or swipe, and the dust disappears, not into the air, but onto the cloth where it stays.
The innovation is in the cloth. These "rags" aren't treated with any chemical cleaning agent (which would eventually wear off), the structure of the material is such that it grabs and holds any particles it comes in contact with. It's that simple.
Fingerprints on the storm door, dust on the TV screen, smudges of who knows what on the computer screen -- all gone with no spray and usually with just one wipe.
I haven't tried it out on anything tougher, although the packaging indicates you can use it for grease. I kind of hate to get them dirty when they are so new.
OK, I'm sounding like a flack for the company I guess, but I really do think these things are going to be in every office and close to every kitchen and bathroom within a few years. It's not just because they are easier, either. One cloth costs about as much a roll of paper towels and bottle of spray, but lasts indefinitely.
So besides going back to the store and buying another three-pack for myself (I now have one in each bath, one in the kitchen, and one next to each computer), I bought some to send to my sister, my mother, and my nephew who is a sophomore living in a college dorm. I'm not expecting him to dust much, but he is into computers and, just maybe, he'll want to clean the screen after his next late night pizza and surfing party. I sent dad one for his van, too.
I wonder what people who really get into cleaning will do when they discover them?
What about offices and professional cleaning crews? Hummm, will they pay several bucks for a rag when they probably get them for free now? Maybe, if it means spending less for cleaning chemicals -- or faster cleaning. And what about people that are allergic to spray cleaners and other household chemicals? They are going to LOVE these. (They don't sanitize, of course, so I don't think we need to sell the Household Cleaning Sector short just yet.)
Note to 3M: The pinkish ones look OK sitting out on the burgundy counters in my kitchen and bath. If all the colors looked good sitting out I would tend to leave them out handy instead of tucking them in a drawer. They would get used more and, theoretically, wear out faster, leading to faster repurchases. If I were you, the first new color I would work on would be Computer Putty.
***
Boy, I sure am enthusiastic, aren't I? I wrote most of the above yesterday and have since had some time to reflect. My reflections are informed by the experience of the Great Iomega Craze of 1996. During 1995 and 1996, The Motley Fool message boards were dominated by Iomega. I was just as crazy as the next guy.
Iomega had a couple of really nice, new, innovative products, and the stock was heading for the stratosphere. We all just loved Zip drives -- expected to see them as standard issue in every new computer in a few years. And they have been very popular, but the stock crashed and is now selling for exactly the same thing (split-adjusted) that it sold for in January of 1996.
There is a lot more to the Iomega story of course -- probably a book's worth at least. My point is that it takes more than an innovative product, even the original Post-Its, to keep a company's stock growing.
Those neat little cloths may indeed be ubiquitous in a few years, and they may well contribute significantly to 3M's earnings, but they are just one product and they will have competitors. In fact Procter and Gamble <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PG)") else Response.Write("(NYSE: PG)") end if %> just brought out Swiffer, a disposable electrostatic dusting cloth that does a nice job with dust (but can't touch Scotch-Brite's way with glass.)
So my enthusiasm was fun, and Scotch-Brite may well help propel 3M a notch higher than otherwise, but enthusiasm usually wanes -- enthusiasm for a product and enthusiasm for a stock, especially a stock with a new product. What keeps 3M going is its pipeline of new ideas, and while Scotch-Brite may be a good example of that pipeline, it's just one of many.
Today's lesson: Watch out for unrealistic expectations and beware of the enthusiast. What counts is the bottom line -- earnings.
Yesterday's lesson: Yesterday's lesson, actually last Thursday's, was for me to watch how I program my Time Value of Money functions. I incorrectly gave the present value of a $1000 zero coupon bond with a 6% discount rate and maturity of 10 years as $780, when it should have been $558. Thanks to everyone who pointed that out.
Fool on and prosper!