When it comes toinvesting , I want to have my cake and eat it
While I love to find companies that rise when the markets do, I
especially lovestocks that buck the trend when the markets
tumble. Investing is about finding opportunities that can deliver
strong returns come rain or shine.
During the housing boom several years ago, I found a company that
was on fire. Amid the frenzy of homebuilding and house-flipping,
this company's products were selling left and right.
As the housingmarket collapsed amid the GreatRecession , this
company's distribution network and sticky customer base helped it
weather the storm. In 2008, as the S&P 500 tumbled 37%, this
company'sstock was up 5.3%
This company makes and distributes paints, coatings and related
products to markets around the world. It is the dominant player
in the U.S. paint market, with a more than 30%market share , and
it has a growing international presence. Its products are sold
under leading brand names such as Dutch Boy, Krylon and
Thompson's Water Seal.
Perhaps most impressively, this company has a 34-year streak
ofdividend increases, a testament to its remarkable performance
through good economies and bad.
If you haven't guessed, the company I'm talking about is
Sherwin-Williams products can be found on the shelves of
two-thirds of all U.S. retailers that sell paint- or
coating-related products. The depth of the company's brand and
product portfolios has allowed it to develop strong brand
recognition, making it a name of choice among consumers.
In addition to its network of nearly 3,400 company-owned stores,
Sherwin-Williams uses some third-party retailers. This captive
distribution network is one of its largest competitive
advantages, allowing it to rely less on big-box retailers and
more on the relationships it develops with its customers.
With the recovery in the U.S. construction market and
existing-homesales well underway, Sherwin-Williams has seen
itspricing power increase along with demand. The company also
maintains a focus on product innovation, which helps
differentiate itself from rivals in a very competitive market.
Sherwin-Williams also has substantial international growth
potential, as foreign sales account for less than 20% of
totalrevenue . In November 2012, it bought Mexico's leading paint
company, Consorcio, opening the door to expansion in those
In January, Sherwin-Williams reported strong results.
Adjustedearnings (excluding one-time items) came in at $6.64 a
share for theyear , up 56.8% from 2011. This impressive growth
was driven by increases in paint salesvolume and price: For the
year,net sales increased 8.8% to $9.53 billion.
For 2013, Sherwin-Williams expects net sales to increase by a
mid-single-digit percentage. It is estimating earnings per share
in the range of $7.45 to $7.55.
Risks to consider:
Because many of Sherwin-Williams' customers are in the
residential and commercial construction sectors, the demand for
paint products can be quite cyclical. Raw material prices can
also fluctuate, potentially squeezing margins. Additionally, if
we see another downturn in theeconomy , consumers may turn to
big-box retailers like
Home Depot (
to savemoney .
Action to take -->
Sherwin-Williams pays a dividend of about 1% and is a good buy up
to $185 per share. Last year, it announced a 7% increase to its
dividend, marking the 34th consecutive year of dividend growth.
Myprice target during the next 12 months on this company is $215,
representing about 25%upside potential.