Still on vacation but some things need attention. Read some of Goldman Sachs’ (GS) research report on Sherwin Williams (SHW) today..
“Although the company’s long-term growth potential remains intact, we are cautious that the cost and demand headwinds will continue challenging SHW in the near term: (1) our economists expect existing home sales (key indicator for paint demand) to trough in 1H2009; (2) the overall non- residential market is poised for a downturn as a substantially tighter credit condition and slowing overall activity weigh on the sector; (3) the raw material cost spike will reach a crescendo on SHW’s P&L in 2H2008 and the consolidation among leading paint ingredient suppliers (DOW & ROH)
may exert additional cost pressure on the paint industry; (4) the double blow of demand weakness and cost spikes could limit the success of SHW’s ongoing aggressive price hikes. Therefore, we see meaningful downside risk to SHW’s earnings and share price in the short term.”
So, short term problem but long term, everything ok. Sell???
Isn’t this a textbook case of what Berkshire Hathaway’s (BEK.A) Warren Buffett means when he say “buy fear”?
I mean, things look tough so sell the hell out of it? Ought we not buy it when there are short term problem that do not affect the long term outlook and growth potential? If you are a current shareholder, Goldman is saying that sell you shares even though long term they expect them to be fine because they may dip for the next months.
These “buy” and “sell” ratings really ought to be ignored by anyone who holds securities for more than a month. They are only good for the day they are issued. Anyone remember all the “buy” recommendations on Google as it neared $700 a share?
If not, read here:
Not sure why much if this matters anyway, Dow chemical (DOW) is going to buy Sherwin anyway…
Disclosure (“none” means no position):Long SHW, DOW
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One reply on “Goldman Sachs (GS): No Value Investing Here”
The price targets of these guys are not worth the paper they are printed on, regardless of your time horizon. It’s just not their job – institutional investors pay them for any insights into the company/industry. And in today’s world, many of these institutions need to find something that will work this quarter. So the sell-side analysts are just giving them what they want.