It's tough to stick with resolutions in the new year. It's only the middle of January, and already some people have slacked off with those new gym memberships, falling short of their resolutions to get fit for the new year. On the other hand, those with financial resolutions, such as bolstering their portfolios with stellar stocks in 2025, may have been dragging their feet, overwhelmed with the many choices before them.
Fortunately, two Fool.com contributors have done the heavy lifting and identified 3M (MMM 1.33%) and Brookfield Infrastructure (BIP 0.97%) as two smart additions to investors' portfolios right now.
3M's new management is determined to position the company for growth
Lee Samaha (3M): It would be an understatement to say the global growth environment is hard to predict. Despite Federal Reserve rate cuts, the benchmark 10-year Treasury yield is within touching distance of a year-long high at 4.69% at the time of writing.
These interest rate pressures will also likely slow some businesses at industrial and consumer products conglomerate 3M. So, don't be surprised if its revenue growth outlook for 2025 doesn't look so hot.
Still, there's more to investing than the top line, and 3M's potential to improve margins and earnings through CEO Bill Brown's restructuring plan is the key to the investment case. His plans are far-reaching and encompass returning the company to its traditional strength of developing innovative product introductions through research and development.
Meanwhile, Brown sees opportunities to enhance 3M's machinery asset utilization and on-time in full (OTIF) deliveries to customers, improve inventory turnover, consolidate suppliers, and implement lean management techniques.
The previous management should arguably have focused on these things. However, 3M spent years trying to improve its now spun-off healthcare business while battling and dealing with the uncertainty of litigation surrounding its production and use of PFAS chemicals and allegedly faulty combat arms earplugs.
Those issues are now cleared, and while 3M has multiyear payments to make over the legal issues, at least it has clarity on them. Furthermore, with a new CEO at the helm, the potential for these self-help initiatives to drive margin expansion and, ultimately, earnings growth means there's significant upside potential for the stock.
Build a better passive income stream with Brookfield Infrastructure
Scott Levine (Brookfield Infrastructure): While the S&P 500 soared more than 23% in 2024, Brookfield Infrastructure failed to keep pace and notched only a 1% gain. And with it tumbling about 2% since the start of 2025, the stock is now hanging on the discount rack. Currently, units of Brookfield Infrastructure are valued at about 2.9 times operating cash flow, representing a discount to their five-year average cash flow multiple of 4.3.
With its global footprint, Brookfield Infrastructure operates a diversified portfolio of infrastructure assets. Transportation assets (e.g., rails, toll roads, and terminals) provide about 42% of the company's funds from operation (FFO), while midstream, utilities, and data (transmission and distribution as well as storage) assets represent 21%, 26%, and 11%, respectively. Management has excelled at growing value from these assets over the past 15 years.
From 2009 to 2023, Brookfield Infrastructure increased its FFO at a 15% compound annual growth rate. Although this achievement doesn't guarantee the company will recognize the same achievement in the future, it does foster confidence that the company will realize management's target of more than 10% annual growth in FFO per unit. This goal, in turn, is supported by the fact that Brookfield Infrastructure has projects in backlog totaling about $7.8 billion as of Sept. 30.
Income investors will certainly find the company's success at growing FFO -- and its expectation that it will continue to do so -- appealing, as it implies that the distributions will be well supported. Management has targeted consistent annual distribution growth of 5% to 9% for the foreseeable future.
Skeptics who fear the 5.2% forward-yielding distribution is jeopardizing the company's financial health should find their concerns cooled by the fact that both S&P Global Ratings and Fitch Ratings rate the company's balance sheet as investment-grade.
Should you buy these stocks now?
Individual investing goals will undoubtedly vary, but those looking for a compelling industrials conglomerate with the capacity for notable earnings growth should strongly consider 3M right now. Income investors, however, will certainly want to consider Brookfield Infrastructure, especially in light of the stock's attractive valuation.
