The stock of coatings and paint supplier Sherwin-Williams (NYSE: SHW) popped Monday morning after news about the company was released late Friday. Shares jumped as much as 7% before paring some of that gain.
Still, as of 10:38 a.m. ET, Sherwin-Williams stock was higher by 4%. The move came after news that the well-known company will join the Dow Jones Industrial Average (DJIA) stock index. It will be replacing chemical maker Dow Inc. in the 30-stock index. Investors see that as good news for the stock that has already moved higher by about 20% this year. But it's not really why investors should be interested in owning shares.
A turbulent environment
Sherwin-Williams stock dropped last month after the company reported third-quarter earnings and missed Wall Street analyst expectations for both earnings per share and revenue. CEO Heidi G. Petz cited "continued choppiness in the demand environment" for the disappointing results after sales and earnings were both slightly below consensus estimates.
Investors pushed the stock lower due to uncertainty in a recovery in the housing market as well as the unknown timing for addressing the extensive damage caused by Hurricanes Helene and Milton.
Inclusion in the venerable index is more symbolic than material, though. Because it's a smaller representation of the entire stock market, many mutual funds track the S&P 500 index rather than just the 30 DJIA stocks. But it does indicate confidence in the future outlook of the company as those that oversee the index composition won't want a declining business in the list of important industrial companies.
Sherwin-Williams may be navigating a difficult environment at the moment, but investors looking longer term should still feel good about having it as part of a portfolio. The stock will join the DJIA on Nov. 8, along with tech titan Nvidia. But investors should look beyond that and note that any positive signs in the housing market and strong economic environment will be a long-term catalyst for Sherwin-Williams' business.
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Howard Smith has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Sherwin-Williams. The Motley Fool has a disclosure policy.
