It Paints an Accurate Picture

 | Apr 09, 2012 | 2:23 PM EDT
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Lately on "Mad Money" we've been highlighting strong stocks where the strength's a mystery. We call the segment as in "What the Heck," as in what the heck is that stock doing so high?

I get the best ideas for the segment from the charts I get hand delivered to my house every Saturday. These are hard copy charts. I've had them delivered for 25 years and they help me put things in perspective.

This weekend I took one look at the chart of Sherwin-Williams (SHW), the paint company, and I said, "What the heck is that stock doing on the 52-week-high list? What the heck is that stock doing up 34% year over year and 25% this year alone?"

Turns out there's nothing astonishing at all to this rally, as we found today in a gigantic preannouncement where it looks like Sherwin Williams is going to earn 92 to 95 cents a share vs. 63 cents a year ago and roughly 70 cents that the analysts thought the company would earn.

Sherwin Williams is part of the major resurgence we are seeing among homeowners fixing up their houses, either to sell them or just to make them look better. How big is the move? Sherwin Williams saw store sales soar 20% this quarter. Some of that's price increases, but most is just a ton of demand.

I have been adamant that people have been too negative about stocks in general and stocks related to home improvement in particular. I take my cue from what the homebuilders are saying, chiefly Toll (TOL) and Lennar (LEN), which are saying that things have improved and in some areas improved dramatically.

But I also have my eyes on Home Depot (HD) and Lowes (LOW) at all times and those stocks seem to hit 52-week highs on a regular basis. They are hitting those highs because of the desire of home buyers and homebuilders to improve their homes or build some.

Throughout this period I have had tremendous resistance from pretty much everyone I talk to. The bears say that the numbers are inflated by good weather. Or they say that the stores are just borrowing from the future.

Sure, there's some upside from the warm weather. But not this kind of upside and not with such uniformity. Witness PPG's (PPG) paint division reporting positive numbers as part of the preannouncement to the upside that we saw for that chemical company.

What's really going on here? Simple: people are sensing that their homes are worth more. You don't throw good money after bad if your house is going down in value. People aren't that stupid.

Companies like Sherwin-Williams confirm how powerful this trend is. If things were really terrible, if employment were dropping like a stone, if whole swaths of America are in the dire straits that the press always seems to be reporting, Sherwin Williams would be at its 52-week low, not the 52-week high. Nothing I heard Friday from the Labor Department changes my mind that this move's for real and that Sherwin-Williams deserves to be higher, maybe even higher than the $111 it's currently trading at.

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