We recently compiled a list of the 10 Best Monopoly Stocks to Buy.In this article, we are going to take a look at where The Sherwin-Williams Company (NYSE:SHW) stands against the other monopoly stocks.
Morgan Stanley believes the bull market might not be finished, and the S&P 500 might close the year with single-digit gains. There can be further declines in the S&P 500, which can result in attractive entry points. Historically, when stocks decline 15%, the average returns after a year tend to be attractive, says Morgan Stanley. Furthermore, the returns are even more attractive when a 20% drop becomes an entry point. That being said, a major risk to the broader equity market can be a resurgence of inflation and the US Fed increasing rates, along with tariff impacts.
S&P 500 Can Deliver Single-Digit Returns
Morgan Stanley Investment Management’s Applied Equity Team believes that 2025 can be a “pause” year for the broader S&P 500, posting single-digit gains. This remains consistent with the firm’s outlook, which was shared at the beginning of the year, suggesting that 3rd year of a bull market tends to deliver mediocre—but positive returns, together with increased volatility. Analyzing 12 times since 1950 that the broader S&P 500 declined a minimum of 20% from its peak, there was a recession in 9 of such instances, says the investment firm. In the current instance, the combination of the market decline or the recession talk appeared to be sufficient to spur a policy response.
Morgan Stanley believes that stocks can retest lows seen in early April. The base case outlook is for gains in 2025, and the market is open 251 days a year. If stocks decline 20% or more, the investment firm opines that investors will do well to consider increasing the equity allocations more aggressively. In the 12 times since 1950 in which the S&P 500 fell 20%, the average subsequent 1-year return with that fall as an entry point is 19%. Fidelity International believes that, in this market, which is characterised by increased uncertainty, a focus on dividends as a component of total return can offer support.
Furthermore, the firm believes that it is critical to combine an emphasis on high-quality businesses with valuation discipline in a bid to avoid overpaying for companies and have a better chance of generating strong long-term returns. In difficult market environments, earnings resilience remains critical. This doesn’t mean a top-down allocation to defensive industries, but selecting companies possessing resilient business models throughout a broad range of sectors with the help of detailed bottom-up analysis. Owning resilient businesses, diversified across industries, leads to increased earnings persistence as compared to the broader market indices, says Fidelity International.
Our Methodology
To list the 10 Best Monopoly Stocks to Buy, we scanned through monopoly ETFs and several online rankings. After getting an extensive list, we chose the ones that were the most popular among hedge funds. Finally, the stocks were arranged in ascending order of their hedge fund sentiment, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is The Sherwin-Williams Company (SHW) the Best Dow Stock for the Next 12 Months?
A close-up of a vibrant paint color being sprayed onto a wooden surface.
The Sherwin-Williams Company (NYSE:SHW) is the largest provider of architectural paint. The company’s market standing in the US architectural coatings market, mainly via its own-brand stores, provides it with significant control. Aoris Investment Management, in its Q4 2024 investor letter, highlighted that, in the US market for professional painters, The Sherwin-Williams Company (NYSE:SHW) has a share ~10x the size of its closest peer. BMO Capital analyst John McNulty reiterated the bullish stance on the company’s stock, giving a “Buy” rating.
The analyst’s rating is backed by The Sherwin-Williams Company (NYSE:SHW)’s ability to enhance efficiency and manage costs effectively, which is projected to continue through FY25. It has demonstrated robust pricing strategies, mainly in its PSG (Paint Stores Group) segment, and plans to extend such strategies to its PCG (Performance Coatings Group) and CBG (Consumer Brands Group) segments, which can fuel incremental price increases, says the analyst. Also, The Sherwin-Williams Company (NYSE:SHW) has leveraged data and simplicity in a bid to improve its gross margins and reduce SG&A expenses, placing it well to meet the financial targets, says McNulty. Notably, in Q1 2025, it posted a gross margin of 48.2% as compared to 47.2% in Q1 2024.
Aoris Investment Management, a specialist international equity manager, published its Q4 2024 investor letter. Here is what the fund said:
“Lastly, we bought The Sherwin-Williams Company (NYSE:SHW), which is the world’s largest paint and coatings company. Yes, paint does sound dull, but Sherwin-Williams excels at serving demanding customers with often highly technical products. In the US market for professional painters, Sherwin-Williams has a share around 10x the size of its closest peer. It also has exclusive supply arrangements with 23 of the 25 largest home builders in the US. Remarkably, given its dominant position, its market share continues to rise.”
Overall SHW ranks 9th on our list of the monopoly stocks to buy. While we acknowledge the potential of SHW as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than SHW but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
