You Might Find Love If You Speed Date With This Stock

Debarati is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Why would you toss your hard-earned money down the confusing labyrinth of Mr. Market? The answer is simple, like any other investor you want ROI! But fishing out a stock which reflects strength and strategic management decisions is what lays the foundation for a desirable buyer-stock interlude.

PPG Industries ) has long attracted my interest. A fine fourth-quarter performance was expected from this competitive chemical maker, but what charms me is its resilience and energy to bounce back after each low.  

Recently, PPG Industries posted decent fourth-quarter 2012 sales with fine profit figures and enough cash. The sales were up from $3.5 billion, year-over-year, to $3.6 billion this past quarter. And mind you, this happened despite the Euro Zone crisis which pressurized the auto and construction industries of Europe to reduce demand from North America’s chemical industry segment. The slowing down of the Chinese economy just added to the strain. What helped the sales figures fairly are the recent, judicious acquisitions made by PPG.

Cashing in on opportunities

However, forced by the persistent weakness in the European market PPG turned to aggressive revenue generation in the American subcontinent. The Performance Coatings segment, for instance, thrived on demand from segments like U.S. architectural coatings, aerospace demand and automotive refinish. The Industrial Coatings segment sales also rose on the back of greater volume growth in North America and other emerging regions.

So, basically the company identified a situation of shrinking revenue and substituted it with other sources of demand. Again, since sales for the quarter had been negatively impacted by lower marine new-build activity and a fall in architectural coatings volumes in the emerging regions, the company decided to improve the situation by setting out to acquire rival AkzoNobel.  And this decision came weeks after competitor Sherwin-Williams Co. ) stuck out $2.34 billion for Mexico’s Consorcio Comex to boost its presence in U.S, Canada and Latin America.

It is quite evident here that we are to witness PPG and Sherwin-Williams fight it out in a bid to acquire dominance over the architectural coatings market. The outcome will definitely be interesting, especially at a time when both rivals will concentrate on generating sales on the back of a resurgent U.S housing market.

The housing market spreads its benevolence

If you are anticipatory with regards to the position of the housing market, shed your fears because this resurgence is no myth. The rulers of the housing market are testimony to its recovery.

Homebuilder Lennar (NYSE: LEN) achieved a 32 percent year-over-year increase in new orders, this week. Lennar’s previous quarter was quite stellar by itself and it was much more than just a hint of America’s recovering housing market. According to Stuart Miller, CEO Executive of Lennar, the company is “extremely well positioned to gain market share in a recovering market”. And that’s not all, the other housing giants like KB Home, Pulte Group and Toll Brothers have portrayed robustness through their earnings reports too.  

And that picture is not a tad bit different for smaller rivals of PPG and Sherwin-Williams like paint and coatings maker Valspar (NYSE: VAL). Valspar senses such potential in the U.S market now that besides launching new palettes, it has chosen to enter into a collaboration with Ace Hardware Corp. wherein it will produce and supply Ace branded paint as well as Valspar branded paint in outlets across America.

While everyone is competing for a share of the housing market, PPG seems to be poised to give others in the space a run for their money.

How 2013 looks

PPG’s pending merger with, home building materials company, Georgia Gulf ) will see the former’s commodity chemicals business merge with the latter. This move will help the combined unit to capture a chunk of the housing space. Since, this entails a merger of equals, stocks are unlikely to slide and investor confidence will continue. Next, the Essilor deal will be the answer to PPG’s underperforming Glass segment. This spin off is PPG’s way of dealing with a low profit unit.

 Be Foolish

PPG goes to great lengths to address its issues, from taking tough decisions such as downsizing, to conducting mergers, restructurings and spin-offs. You name it, these guys have done it. And all this requires passion and consistency. I see passion in their actions. You couldn’t deny that their figures have been consistently appealing, could you? 


thebose has no position in any stocks mentioned. The Motley Fool recommends Sherwin-Williams. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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