Sherwin-Williams' Big Fall May Be a Buying Opportunity (SHW)

| About: The Sherwin-Williams (SHW)

As Geoff Gannon pointed out so well Wednesday, Sherwin-Williams' (NYSE:SHW) decline is well worth noting. The beating continued on Thursday.

Sherwin-Williams is a marvelous collection of brand names: Dutch Boy, Sherwin-Williams, Krylon, and Kem-Tone among others.

The company received an adverse ruling in Rhode Island Wednesday due to lead paint liability. In the first trial, a hung jury was 4-2 in favor of defendants. DuPont avoided the second trial by paying off the lawyers $12 million. Not sure how much of this found its way to the injured or wronged! In the second trial, the jury also became deadlocked, however, the judge ordered the jury to deliberate further.

Lead paint can easily be made safe -- paint over it. Landlords or homeowners should be the ones held liable for old lead paint. But put reason aside, this is tort law in America! Go for the dough!

Next Tuesday, RI and defendant attorneys will make recommendations to the jury on punitive damages to be assessed. The jury will make its recommendation to the judge who may or may not agree. Expect appeals from SHW at the state level and beyond if necessary.

Back to fundamental comments about the company. In the period from year end 2001 to September 2005 (the last reported quarter) SHW has generated CFFO of $2.5 billion. Capex over this period was $635 million, roughly equal to depreciation of $600 million. The company has made $720 million in acquisitions over this period.

How were the shareholders treated? Free cash flow for the period totaled $1.9 billion of which $540 million was returned to shareholders by way of dividends. An additional $1.08 billion was returned through share buybacks!

Return on invested capital for the most recent twelve months has been 21%, well above recent history of around 11%.

The total decline in market value since the “news