These two will survive new lawsuits

Article Excerpt

We designed our system to zero in on high-quality stocks with long-term growth potential. That helps us steer clear of companies with big legal problems. Lately, two of our recommendations have dropped sharply due to class-action lawsuits. While these suits are a cause for concern, these two industry leaders should survive these recent setbacks. SHERWIN-WILLIAMS INC. $51 (New York symbol SHW; WSSF Rating: Above average) got as high as $54 in February 2006, but dropped to $37 after a Rhode Island court ruled that the company and two other paint makers are liable for harm caused by lead-based paints. Sherwin stopped making lead paint over 30 years ago, but it and the two other companies could conceivably have to spend over $1 billion to clean up about 250,000 homes in Rhode Island alone. That’s a sizable expense considering that Sherwin earned $463.3 million or $3.28 a share in 2005. However, the court exempted Sherwin from punitive damages. That helped the stock recapture…

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