The Misfits: RPM International (RPM)

The ubiquitous chemical manufacturer that few could pick out of a lineup has generated phenomenal returns for more than 70 years.

The Alchemist, Mattheus von Helmont, 17th century, oil on canvas (Science History Institute, Philadelphia)

One thing that sticks out in Common Stocks, Uncommon Profits is Fisher’s love for chemical companies. He gushed about Dow Chemical (NYSE: DOW) and E.I. DuPont de Nemours (NYSE: DD) as if they were his children. At the time, they were what we would view semiconductor companies today. They built revolutionary products that multiplied yearly and transformed nearly every facet of life.

The chemical industry isn’t the hot industry it was anymore. Many of its products have become commoditized and traded on a global scale. Dow and DuPont, once the incubators of human progress, are shells of their former selves. For much of the past 30 years, they were more or less market-performing businesses until a bizarre merger-and-split a few years ago that only created value for the consultants who conceived it and the bankers who ran the deal book.

Despite the maturity of the chemical industry in the U.S. and its cyclicality, several companies have continued to generate stellar returns for investors. Ironically, some of the best-performing companies in the industry don’t produce innovative products.

A tremendous and perhaps well-known version of this phenomenon is Sherwin-Williams (NYSE: SHW). Innovation and house paint rarely go hand in hand. Still, it is a business that has generated spectacular returns thanks to efficient operations, some modest pricing power, and a focus on capital returns.

If you have used a Sherwin-Williams product, then there a decent chance you’ve also used an RPM International (NYSE: RPM) product as well without even knowing it. The ubiquitous chemical manufacturer has been a stellar performer in its own right, producing a 62,800% return since its IPO in 1971.

Let’s dig in.

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