Buffett Regrets Not Buying This


When Buffett acquired Benjamin Moore in 2000, Buffett assured the independent dealers that they will not sell their paint through rivals Home Depot (HD) and Lowe’s (LOW). In 2012, the CEO almost ruined Buffett’s promise, which was later halted, creating distrust and turmoil at Moore. Between 2000 and 2013, Moore paints rose only 40% while Sherwin-Williams (SHW) boosted its revenues 104%, and Valspar boosted revenues 196% in the same period. Buffett later acknowledged, “Sherwin-Williams has done a better job.”

Sherwin-Williams has an outstanding track record, and we are confident that its recent acquisition of Valspar (shares delisted from the NYSE as of 6/1/2017) for $113 per share will create tremendous value for shareholders over the next decade. This deal has created the largest coatings company in the world, management has communicated run-rate synergies of $320 million in the areas of sourcing, SG&A, and process efficiency savings within three years. The second quarter ended June 30, 2017, financial results will be announced on Thursday, July 20, 2017, and Sherwin-Williams will provide a combined company outlook for the third quarter and full year 2017.

Sherwin-Williams was founded by Henry Sherwin and Edward Williams in 1866 and has grown to become the largest coatings manufacturer in the United States and the third-largest worldwide. It is a global leader in the manufacture, development, distribution, and sale of paint, coatings, and related products to professional, industrial, commercial, and retail customers. Its brand portfolio includes names such as: HGTV Home, Krylon, Minwax, Thompson’s, Water Seal, and many more. The company operates under four reportable segments: Paint Stores Group, Consumer Group, Global Finishes Group, and Latin America Coatings Group.

For the fiscal year 2016, total sales grew 4.6% and income grew 3%. Below, I will detail the main drivers of business performance and forward implications by segment as outlined in the latest 10-K annual report.


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