Sherwin-Williams: As expected, uptrend continues

Posted Oct 5th 2009 2:00PM by Joseph Lazzaro
Filed under: Stocks to Buy

Relatively low-profile paint-supplier Sherwin-Williams (NYSE: SHW) certainly isn't the sexiest company. But hey, in this economy, somber but steady profits are just fine, thank you.

The company is on-schedule to benefit from a stabilizing U.S. housing sector. (And given the housing sector's pronounced recession over the past three years, signs of stabilization represent a considerable improvement, from a supplier industry standpoint.)

Hence, I'm Reiterating my Buy rating for Sherwin-Williams, first recommended on June 12, 2009 at a price of $55.10.

Don't look for stellar same store sales increases for SHW in FY2010 but the view from here still argues that the current P/E of 16 is reasonable. And again. any upside surprises regarding the housing sector will spark renewed institutional investor enthusiasm. In sum, the risk/reward for SHW remains favorable. The First Call FY2009/FY2010 EPS estimates for SHW are $3.63 to $4.08.

Stock Analysis: Sherwin-Williams is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in SHW now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your SHW position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $37.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: Sherwin-Williams, SHW