Dear Mr. Berko: Please give me your thoughts on 3M Co. I owned the stock in 1997 at $49 a share and sold it in 1999 at $50. I guess I just didn’t give it enough time because 3M’s revenue numbers and its earnings and dividends have gone almost straight up since then and the stock now sells at $85.55.I use many of their products, and they’re all top-quality, priced fairly and dependable. Can you think of a reason not to own 100 shares of 3M?

D.P., Moline, Ill.

Dear D.P.

I think 3M Co. (MMM-$85.55) is a marvelous, profitable, successful, admired company. I think that MMM, with more than 1,000 scientists and an annual research budget exceeding $1.2 billion a year (which has produced more than 50,000 products), will continue to be a leader in American industry and technology. And I believe a company that makes “lime yellow” traffic signs, Scotchgard and a salve for genital warts will continue to grow its revenues, improve its earnings and increase its dividends for a long time to come.

MMM, one of the bluest of the blue-chip stocks, was founded in 1902 by five Minnesota businessmen who financed a company to mine minerals for grinding-wheel abrasives. During 3M’s first calendar year in business, the company generated $6,285.22 in revenues and earned a net profit of $946.22.

Today MMM is a diversified technology company and one of the 30 stocks that make up the Dow Jones industrial average. Based in St. Paul, Minn., the company has manufacturing operations in 61 countries and customers in 203 nations. Last year, 3M generated $18.2 billion in revenues ($10.6 billion came from overseas), reported $2.4 billion in net income and paid $1.2 billion in income taxes.

MMM separates its operations into seven divisions:

1. Consumer and Office, with 2003 revenues of $2.6 billion. Key products include tapes, stationery, Scotchgard and more than 600 Post-it products. Last year this division earned $460 million.

2. Health Care generated $4 billion in 2003 revenues selling medical supplies, surgical supplies and branded prescription drug products related to women’s health care, cardiology, dermatology and respiratory medicine. In 2003, this division earned the company $1.03 billion. That’s a 25 percent profit margin on revenues.

3. Safety and Protection Services generated $1.93 billion in revenues and $437 million in earnings by making and selling respirators, protective films, retro-reflective materials, theft-protection systems, label systems, optical systems, insulation and specialty materials.

4. Industrial had $3.35 billion in revenues and earned $458 million. This division sells tapes, bonding materials and adhesives for industrial and commercial applications.

5. Display and Graphics had $2.96 billion in revenues and earned $885 million in net income last year. Its key products include optical film and lenses for touch-screen devices and reflective materials for signs and license plates.

6. Transportation generated $1.54 billion in sales and $389 million in earnings. Transportation markets abrasives, adhesive foams and tapes for trucks, cars, auto repair and marine craft.

7. Electro and Communication had $1.82 billion in revenues and $255 million in earnings. This division produces connectors for electrical and telecommunication equipment and microconnectors for other electronic devices such as printers.

MMM’s products dot every highway, every byway, every nook, every cranny, corner, lair, alcove and shelf of almost every business in almost every town in almost every country in the world. 3M is such a unique and diversified company that its revenues, earnings and dividends are almost impervious to inflation, recession and the economic cycle.

MMM is such a superb company with such enormously capable management that most observers believe it will continue to grow its revenues from $18 billion last year to at least $25 billion by 2008. It is such a well-positioned and dynamic company that observers think it can grow its earnings from $3.02 a share last year to $4.40 by 2008.

MMM’s research department has such awesome talent that observers believe it will continue to produce compelling new products that will march the company proudly into every new year.

And yet, at $85.55 I wouldn’t touch a single share. MMM trades at a daredevil price-earnings ratio of 28, which in my opinion is ridiculous. That’s a higher P/E than Microsoft Corp., Intel Corp. or Oracle Corp. The company’s average P/E during the past 18 years is a much more reasonable 20.5, and there’s nothing in its market basket for today or five years hence that justifies a 40 percent higher P/E.

Frankly, at $85.55, I’m convinced that MMM’s shares are seriously overpriced. I know that 19 of the 25 suits on the Street who follow the stock rank it as a “buy,” and I suspect that those 19 are being paid for their analyses. I’d buy 3M at $68 to $72, but certainly not at $85.55.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.