As noted earlier, unsexy paint-supplier Sherwin-Williams (SHW) is not likely to grace the cover of Fortune or Forbes magazine anytime soon, but investors will accept the company's profits, just the same, which is why I'm reiterating my buy rating for the company's shares, first recommended on June 12, 2009, at a price of $55.10. Wall Street has started to notice the stock, but a considerable portion of the institutional investor community remains bearish, arguing that the U.S. housing sector's reduced size will weigh on paint results.
Even so, the alternate take is preferred here: 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.) The First Call FY2009/FY2010 EPS estimates for SHW are $3.69 to $4.09.
However, this may be your last chance to buy SHW's shares and earn an outsized gain in this expansion cycle.
Technically, Sherwin's stock chart is in an uptrend, punctuated with above-average volatility. One bad quarterly earnings report will cause a swoon, so if you're squeamish, don't buy SHW.
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 one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your SHW position before February 2010. 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.
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