SHWSherwin-Williams Company (The)

Sherwin-Williams sells paint through its own stores — and that is its main advantage over competitors.

The primary buyer is the professional painter rather than the homeowner. He collects material for the job in the morning, and store proximity decides the supplier more than price does. Thousands of company-owned outlets are the asset competitors selling through third-party chains cannot replicate.

Demand splits in two: repainting existing homes is durable and largely rate-insensitive, while new construction is cyclical. Industrial coatings for cars, packaging and equipment provide a third, separate cycle.

Costs are set by titanium dioxide, resin and solvent prices — petrochemical derivatives. The company is able to pass them into price with a quarter's lag. Sherwin-Williams is a dividend aristocrat with a long record of increases.