Sherwin-Williams Co.

Stockchase Research Editor: Michael O'Reilly SHW is well positioned for the home improvement trend underway during the pandemic. Recent earnings reported a 28% increase in EPS and cash increased by over 40% to over $1 billion compared to last year. There was a slight slow down in their performance coatings division due to the pandemic, but consumer brands were up 21% in sales. The company guidance has increased its second half EPS outlook by 14%. We also like that the dividend payout ratio of less than 30% means safety in the dividend going forward. Yield 0.85%

(A Top Pick Apr 22/19, Up 25%) Like Home Depot, this is a win-win, whether people stay hope and renovate, or if they move houses (which he predicts). SHW will benefit from either trend.

(A Top Pick July 19/16. Up 17.07%.) He would continue to buy this at today’s prices. The chemicals group as a whole is improving. Housing starts are rising smartly, and people are investing in their homes. There is still a big, big backlog of people who held off on buying homes.

This has had huge growth in both earnings and share price over the last number of years, because it has been tied into both the US consumer and the US housing market. It is a brand most used by contractors. However, it is at a very high premium in terms of valuation at roughly 26X earnings. They are expecting earnings growth of 10%. This is not one he would be buying.

(A Top Pick Feb 18/16. Up 22.14%.) He really likes home building and the building industry in general. There is a big pent-up demand. As people renovate and build new homes, the paint companies are doing very, very well. (See Top Picks.)

The biggest paint and wallcovering company in the US. The stock has moved significantly, much more so than earnings. This is one where you want to wait for the price to come down or for earnings to go up.

It was trading sideways and then moved into a down trend. It broke a couple of significant support levels. He would be net bear on this stock.

He really likes the US economy. 80% of this company’s revenues come from the US domestic economy. The housing industry is improving and consumer confidence just hit new highs. Recently acquired Valspar, the #4 paint company, so they’ll have an opportunity to cut costs and fold that company in. Dividend yield of 1.09%.

The US consumer is slowly improving and low energy prices are great for the consumer. This is the best brand in the paint industry. As the economy improves they will benefit. Their biggest input is petroleum products. 80% of the revenue comes from the US.

The sector continues to strength through to early January. It has started an upward trend, outperforming the market and short term momentum indicators are positive. Stick with it for now.