“From January 1, 1990 to January 12, 2022 Sherwin Williams, the boring paint & coatings brand in most of our local neighborhoods returned roughly 18,890% versus the S&P 500 return of roughly 2510% or roughly 6x what the market gave investors.”
COMPANY PROFILE
Sherwin Williams has been around since 1866. Sherwin-Williams has one of the industry’s most recognized portfolios of branded and private-label products. The Company’s Sherwin-Williams® branded products are sold exclusively through a chain of more than 4,438 company operated stores and facilities in the United States, Canada, the Caribbean and Latin America. Additional brands are sold through leading mass merchandisers, home centers, independent paint dealers, hardware stores, automotive retailers, and industrial distributors across North America and in parts of Europe, China, Australia and New Zealand. We also supply a broad range of highly engineered solutions for the construction, industrial, packaging and transportation markets in more than 120 countries around the world.
Style Factor Benefits
From a factor scoring perspective versus the other 199 brands in the brands index, here’s where Sherwin Williams scores well as of 1/12/2022:
80% strong price momentum trends
86% high dividend growth
90% high shareholder yield - buybacks, dividend payments and dividend growth
92% Low volatility equity - aka a defensive stock typically
81% Low 5 year default probability - aka a safety stock
Update 1/12/2022
SHW pre-announced earnings results on Jan 14, lighter than expected but I am not worried about the long-term tail in this business. Wage pressures continue across every industry, finding labor is even harder. With Omicron running wild but looking like we are nearing a peak, the “sick-outs” should ease as people get back to regular life. They have had some staffing issues over the last few months with spikes in covid and also are seeing some raw material supply constraints still but largely they believe the trends are moving in the right direction. The most important factor here: demand remains very strong and price increases should not affect their business trends so I will continue adding on any dips the market offers up.
Betting on global home improvement and home construction and the continued need for paint & coatings is typically a sound strategy. This stock can be volatile at times given the cyclicality of the economy but SHW has proven to be a solid investment for opportunistic investors willing to buy dips. I’m of the believe that the housing market is more mid-cycle than late cycle as millennials begin their household formation process and begin buying homes and having families. Because of high input costs, SHW has implemented a number of price hikes to combat higher labor and input costs but demand is still very strong. As input costs and inflation roll over and ease, and the price hikes stick, while demand is high, there’s room for better margin expansion on the back end of this inflation scare. The U.S. housing stock is 40 years old on average so home improvements, renovations and new housing offer a strong and stable investment environment. SHW stock should have a very bright future for many years to come given this important tailwind. SHW has a major presence in most communities and it’s a highly recognizable and understandable business for an investor to assess. That’s the way I like it. Know what you own and why you own it.