Paint the Town Green with VAL

Traders might see red if they don't get into this stock ahead of its move up

   

The housing market has been improving all year, and what was once a sector to steer clear of until this year has been one of the best-performing sectors in 2012. Homebuilder stocks such as PulteGroup (NYSE:PHM) and Lennar Corp. (NYSE:LEN) have enjoyed banner years, and home improvement stocks such as Home Depot (NYSE:HD) and Lowes (NYSE:LOW) also have enjoyed extremely strong years.

Another home-related group painting the town green with profits is paint stocks.

Industry powerhouse Sherman-Williams (NYSE:SHW) shares are up 67.5% year-to-date, while PPG Industries (NYSE:PPG) shares have surged 57.9% in 2012. Both of these stocks are strong, and both represent good momentum plays for investors, but the company in this space I like best is Valspar Corp. (NYSE:VAL).

Shares of the paint, varnish and industrial coatings firm are up 58.7% year to date, having climbed steadily throughout the year on a series of strong earnings reports. Most recently, Valspar beat Street expectations with fiscal Q4 earnings that climbed 2% to 86 cents a share. That showing bested EPS estimates by a penny a share, even as sales figures slowed by 2% to $1.02 billion.

For the full year, Valspar saw a 24% jump in profits. Management also confirmed its outlook for fiscal 2013, expecting EPS of $3.65 to $3.85 a share, which represents growth of 11% to 17% over the stellar 2012 showing.

VAL 12 24 12 Paint the Town Green with VAL

In mid-December, Valspar painted a new coat of dividends to shareholders, upping its quarterly payout 15% to 23 cents per share from 20 cents. The move was the 35th consecutive year of an increased dividend to VAL shareholders.

For traders, the chart here shows strong momentum, and a potential breakout on new 52-week highs. I suspect that the housing market improvement will continue in 2013, and that means more upside for VAL going forward.

I like VAL shares for another 15% gain during the next several months, which would put your price target at $71.71. To protect your position on the downside if the paint spills lower from here, set a stop-loss at $57.37, which is 8% below the Dec. 21 close of $62.36.

As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/247trader/paint-the-town-green-with-val/.

©2014 InvestorPlace Media, LLC

Comments are currently unavailable. Please check back soon.