Sherwin Williams Co.: The “Cover the Earth” Crusade

I have never encountered a company with a more ambitious, world dominating slogan that Sherwin Williams Co. (SHW). Fairly aggressive for a paint and coatings company but satisfyingly appropriate. Kudos to the marketing team.

Overview

Despite being founded in 1866, SHW does not seem to get much coverage in investing circles. I believe much of this is attributed to the low starting dividend yield of the company. However, that does not mean that it has not been a successful investment. For those unfamiliar, SHW is “involved in the development, manufacture, distribution, and sale of paint, coatings, and related products.” How many companies from the mid-1800s are still in existence and thriving today?

Furthermore, SHW shifted gears in 2016 and entered into an agreement to acquire Valspar (VAL). This acquisition will drastically increase SHW’s footprint in the coating business. If the deal closes this year, and it looks like it will, the combined company will surpass PPG Industries (PPG) as the world leader in paints and coatings. The acquisition will give SHW additional market share and revenue while cutting costs, increasing margins, and thus earnings.
When I think about SHW, their moat involves having pricing-power in a market dominated by a handful of players. Despite being listed as a materials company, they have pricing-power similar to Hershey (HSY) or Coca-Cola (KO). Their brand loyalty, customer service, and dominant market share keeps bringing customers back. If you want remodel your home or repaint a room, are you really going to care about a 3-7% price increase on a can of paint? You will probably care about that as much as you care about the price increase of a bottle of Coke from $1.20 to $1.28. This moat is what makes them exceptional.
SHW has been a superb investment over the past decades. The stock has compounded at 12.1% and 16.0% annually over the past 30-yr and 10-yr time frames, respectively. This is outstanding for a company that is lumped in with commodity and other material-labeled companies. Keep reading…

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2 Replies to “Sherwin Williams Co.: The “Cover the Earth” Crusade”

  1. I’m a big fan of Eddy Elfenbein and he turned me on to Sherwin-Williams when he put them on his buy list. They’ve been doing awesome this year and hopefully have some more room to grow. Thanks for sharing!!!

    1. Holden Alexander says: Reply

      I need to go check out his blog. Thanks for the recommendation. Agreed, this year has been a great one for them. They are a great buy-and-hold company if you want to maintain ~10-12% returns annually.

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