3M Stock

[accubond]

Hi all,

I am a 3M employee and up until the last couple years I have thoroughly enjoyed my 15% discount on our stock as part of our GESPP program. I have gone so far as to tell co-workers that "they're crazy for not taking advantage of this discount" and now here I am, seriously considering opting out of the program altogether and maybe just taking that 10% of my net pay and burying it in a coffee can in the back yard! What would you guys do? I've sold some here and there for toys and living expenses as they come up but overall it's been in a hold mode. I view 15% in the green as even and as of right now that account is 25% in the red! The dividend is solid and I LOVE free money but even that healthy dividend can't even come close to stopping the bleeding. Any input/advice is greatly appreciated. I've been telling myslef "you're buying low" but I just don't know how much longer I should be doing this?

 

[rogerthat]

How long until you retire?

 

[TOGIE]

i dunno. i don't know much of anything.

but, fwiw, my wife will get a healthy stock vesting in september and i'm probably gonna sell 90% or more of it and rotate most of that to a couple of index funds the next day.

 

[VikingsGuy]

Investments used for financial security and/or retirement need to be fully diversified. Unless you have inside information, the studies show you will not be able to predict the market ups and downs of any one stock. In general, the S&P500 is down 25% so this one stock does not appear to be unique. But again, that is not the point. You need to look at your whole portfolio and feel comfortable with its diversity, balance and breadth.

Also, remember that your annual salary, your bonus, and likely some of your 401k matching or individual pension account company contributions are tied to your company's success, so the average employee is already super exposed to their employer's future. With that context, I generally recommend not buying more company stock - premium or not until you have a fully funded liquid emergency fund and fully funded balanced retirement resources.

 

[VikingsGuy]

i dunno. i don't know much of anything.

but, fwiw, my wife will get a healthy stock vesting in september and i'm probably gonna sell 90% or more of it and rotate most of that to a couple of index funds the next day.

I do this every time, not because I lack faith in my company (which I think very highly of), but to balance my overall financial exposure to one company.

 

[Deleted member 28227]

i dunno. i don't know much of anything.

but, fwiw, my wife will get a healthy stock vesting in september and i'm probably gonna sell 90% or more of it and rotate most of that to a couple of index funds the next day.

I always sell my company stock as well and don’t invest in my industry.

As @VikingsGuy said too much exposure to one company, or industry for that matter.

 

[TOGIE]

I always sell my company stock as well and don’t invest in my industry.

As @VikingsGuy said too much exposure to one company, or industry for that matter.

and even if you know your company or industry will do and likely continue to do great, the market can just disagree for whatever reason it wants to.

just too risky from every angle

 

[232401a]

Also, remember that your annual salary, your bonus, and likely some of your 401k matching or individual pension account company contributions are tied to your company's success, so the average employee is already super exposed to their employer's future. With that context, I generally recommend not buying more company stock - premium or not until you have a fully funded liquid emergency fund and fully funded balanced retirement resources.

All so true and very important.

I see people inappropriately extrapolate that logic to certain types of stock options and leave money/growth on the table. They hear the above logic and then immediately exercise options upon vesting. And lose the opportunity to keep the company's money for a longer period.

If they give you a share of stock - generally sell it immediately upon vesting.
If they give you an option on a share of stock - generally hold it until close to expiration.

ESPP at 15% off? You're crazy not to buy maximum allowed- even if you personally don't believe in the company. But sell all of it immediately as soon as allowed. But always after 12 months so it is a long term capital gain.

 

[accubond]

I'm 42 and to be honest I viewed this more as a savings account vs a retirement account. I buy the maximum I can (10%) and kept it due to the dividend but this definitely sounds like wrong thing to do? I hate to sell anything now with it being so low (you don't lose unless you sell in the red?) but will it ever get back to the green and do you keep buying due to that 15% discount?

 

[VikingsGuy]

All so true and very important.

I see people inappropriately extrapolate that logic to certain types of stock options and leave money/growth on the table. They hear the above logic and then immediately exercise options upon vesting. And lose the opportunity to keep the company's money for a longer period.

If they give you a share of stock - generally sell it immediately upon vesting.
If they give you an option on a share of stock - generally hold it until close to expiration.

ESPP at 15% off? You're crazy not to buy maximum allowed- even if you personally don't believe in the company. But sell all of it immediately as soon as allowed. But always after 12 months so it is a long term capital gain.

We agree on stock.
In my opinion the options question depends on. For folks that don't have a liquid 12 months backup funds, I would still sells options that are well in the money sooner, to reduce risk of layoff impact and then hold longer when you have the buffer.

As for 15% off plan, you lose a third to taxes, so it is a 10% benefit and if the vesting period is more than a year out you use a lot of diversification potential and you may even lose the "10% gain". So again, liquid back-up first! Diversified long-term savings second. Opportunistic purchases as gravy when the rest is well settled will serve the average person better. You never know who will be the next Questel.

 

[VikingsGuy]

I'm 42 and to be honest I viewed this more as a savings account vs a retirement account. I buy the maximum I can (10%) and kept it due to the dividend but this definitely sounds like wrong thing to do? I hate to sell anything now with it being so low (you don't lose unless you sell in the red?) but will it ever get back to the green and do you keep buying due to that 15% discount?

You have to have the overall balance of your portfolio at hand to assess your options. There is no context-free good/bad here.

 

[accubond]

We agree on stock.
In my opinion the options question depends on. For folks that don't have a liquid 12 months backus funds, I would still sells options that are well in the money sooner, to reduce risk of layoff impact and then hold longer when you have the buffer.

As for 15% off plan, you lose a third to taxes, so it is a 10% benefit and if the vesting period is more than a year out you use a lot of diversification potential and you may even lose the "10% gain". So again, liquid back-up first! Diversified long-term savings second. Opportunistic purchases as gravy when the rest is well settled will serve the average person better. You never know who will be the next Questel.

This stock is purchased post tax.

 

[232401a]

I'm 42 and to be honest I viewed this more as a savings account vs a retirement account. I buy the maximum I can (10%) and kept it due to the dividend but this definitely sounds like wrong thing to do? I hate to sell anything now with it being so low (you don't lose unless you sell in the red?) but will it ever get back to the green and do you keep buying due to that 15% discount?

I would absolutely keep buying ESPP. 10% of salary @ 15% off. No-brainer.

How/when to sell (and diversify) the accumulated balance becomes a much more difficult question and I can't begin to answer that. Sounds like some might even be sold at a loss. Might be able to net zero those with some winning years and pay no capital gains taxes on some of that. And then use that money to diversify which should be your goal.

Having some losers to offset your winners can help you feel good by zeroing out your gains (avoiding some tax). Maybe commit to doing 20% each year for 5 years and get after it.

I wish you had been selling ESPP annually - as soon as it vests and becomes a LT capital gain.

LT Capital Gains tax is 0, 15 or 20%, not your marginal rate.

 

[232401a]

This stock is purchased post tax.

Sounds like you used post tax income to buy in to your ESPP. That is a different issue than paying short term or long term capital gains tax on the growth when you go to sell your investment.

 

[232401a]

As for 15% off plan, you lose a third to taxes, so it is a 10% benefit and if the vesting period is more than a year out you use a lot of diversification potential and you may even lose the "10% gain".

Shouldn't lose one-third as long as kept it 12 months to be a long term capital gain. He is probably in the bracket where he pays 20% tax on long term capital gains.

And I hope that anyone having a discussion about issues like this has himself adequately protected with liquidity, cash (to withstand 6-ish months out of work, etc.).

 

[232401a]

as of right now that account is 25% in the red!

Oh, 3M is doing that bad. Read up on "Tax Loss Harvesting" and how you can use up to $3,000 in capital losses to off-set $3,000 in W2 income (annually).

Be careful how you do it, but I would probably slow-roll those losses out of that account to off-set income tax on W2 income. But make sure you don't have any capital gains that year. As those losses will offset CG before they would be used to off-set W2 income. But $3,000 in losses per year might be a slower diversification than you are wanting.

You missed selling by 12/31 for TY 2022, but keep it in mind for next year.

 

[howl]

My MMM position is up 2%. If I were getting 10% off I'd buy more up to my gambling budget. As I do not and I only did it with the play account I will not. Understand I have my critical and investments in more secure and conventional...is vehicles the right word? Always feel like a doofus trying to use investor speak.

On the other hand, if you would like some hot tips on stocks worse than MMM to buy I have a couple I cal recommend.

 

[VikingsGuy]

This stock is purchased post tax.

I understand, but I assume the 15% discount is viewed as "compensation" from your employer and is subject to income tax at either grant or vest depending on the program structure.

 

[VikingsGuy]

Shouldn't lose one-third as long as kept it 12 months to be a long term capital gain. He is probably in the bracket where he pays 20% tax on long term capital gains.

And I hope that anyone having a discussion about issues like this has himself adequately protected with liquidity, cash (to withstand 6-ish months out of work, etc.).

The data suggests a large portion of supposedly well-off professionals are effectively living on a cash-flow cliff month to month

 

[accubond]

Resurrecting an old thread here. I still own all of the stock that did when I first posted as I just couldn't bring myself to sell at a loss. I have also quit buying altogether as I just don't see an end to the litigation. My stock has come back some (-16.7% vs -25%) and I feel like chatter about 3M cutting it's dividend is gaining steam and I feel like that could send the stock into a free fall and then most likely a very slow ascent from wherever the new bottom ends up being. What do you guys think a dividend cut will do a Dividend Aristocat and if I'm right would it make sense to sell now and cut my losses?