Illustrations by Andrew Lyons
As with any investment, your capital is at risk and any income is not guaranteed.
Welcome to the real world.
While the promise of AI sustains the US stock market, much of the country is having a tough time. I’ve been in Cleveland, Ohio, as part of a tour of SAINTS’ US equity holdings and prospects. It’s far from the glow of Silicon Valley, and mostly home to the ‘real’ economy: nuts and bolts (literally), air conditioning, pet medicine, paint and industrial coatings.
SAINTS looks at these companies more than the Baillie Gifford norm. Part of my job as an income-and-growth manager is to explore companies that the market mistakes for dull incumbents in utilitarian sectors. I’m probing for the cultural qualities that mean aggressive entrepreneurialism can hide in plain sight, while throwing off dependable dividend cash.
For these real-economy businesses, the US economic background isn’t cheering. Factory output is static, freight volumes are soft, housing starts have slipped, and consumers aren’t spending. Even long-established companies face declining sales, while the Trump tariffs could exacerbate inflation.
A city that’s seen it all
Cleveland is used to this. The city has seen more downs than ups in the long hangover following its heyday as a midwestern industrial-financial hub. Wealth had blossomed after 1870, when John D Rockefeller – still relatively richer than Musk or Zuckerberg – chose the city on the Cuyahoga River and Lake Erie as Standard Oil HQ.
Oil, ore, water transport and immigrant labour primed Cleveland’s big role in the age of gilded grit. That legacy lives on in imposing civic architecture and spectacular art treasures. Now, more than halved in population since its 1950 peak, with parkland filling in the lakeshore blanks, this sports-crazy city, where the term ‘rock and roll’ was first heard, is far from the gun-ridden rust-belt urban caricature. But would I bring the family for a holiday? Probably not.
This was one of two US visits in 2025. SAINTS’ companies often have a brick-and-mortar presence – Home Depot, America’s B&Q, is a good example – where there is value in actually being there. We take our time visiting company outlets, eyeballing the product offering and talking to staff. Desk research – even when enhanced by new AI tools – tells us a lot about numbers and data, but we want an unfiltered view of the experience their customers are getting.
No substitute for seeing things close up
This due diligence is key to being an active, engaged manager. If we’re going to own these companies for 10 years, we need a sure sense of how things are working internally and on the ground. Drawing out that information takes technique. A different set of questions is needed. Also, some nous about when and where to ask them.
Think about it. There are 4,000 stocks in the US markets. Every company has a story to spin about why its shares should go up. Investor relations professionals highlight their latest and best outlets and products. But you get a different flavour of information from standard-issue outlets and conversations at all levels of the hierarchy.
Hence my taking trains, planes and automobiles to get to Cleveland to talk paint. I was there to meet two potential new holdings. Sherwin-Williams set up shop here in 1875. Today, it’s the US’s equivalent of Dulux, with a market share of about 30 per cent. RPM International is a leader in industrial coatings, sealants and other construction and maintenance essentials. Its products have been indispensable to the building and DIY trades since 1947.
Both companies are big dividend payers: RPM matches SAINTS’ own record by having increased its dividend every year for the past 52 years, while Sherwin-Williams only slightly lags at 47.
Yes, these companies sound as ‘utilitarian’ as it comes. The gags about ‘watching paint dry’ write themselves. But seeing their operations up close, I get to understand the granular detail of their competitive edge and confirm my hunch that these companies possess an expansive energy that defies their age and market position.
As investors, we’re happy to watch paint quietly compound. Sherwin-Williams is hugely profitable – margins of about 40 per cent – and it can raise prices without losing customers.
Paint is essentially a mix of three or four base ingredients, plus a touch of tint. It has what we call high operating leverage: you can achieve significant growth without having to layer on extra coats of capital.
Everything always needs a lick of paint, so recurring revenue is stable. Moreover, one of its big competitors had just gone bankrupt, citing a difficult operating environment. Sherwin-Williams’ leadership told me that it had a “once-in-a-lifetime opportunity” for more growth.
Both Sherwin-Williams and RPM are credible candidates for inclusion among the long-term compounders that pay great dividends. But we need to understand the businesses they’re in before we commit.
Understanding the customers’ perspective
During my half-day with Sherwin-Williams, I packed in several site visits with representatives from the trade and retail operations and visited their mixing centres. I spoke to salespeople, backroom staff, account development workers and financial personnel. We weren’t asking about next month’s sales, but about sources of competitive advantage and areas of opportunity on a 10-year view.
Sherwin-Williams is unusual for having its own chain of paint stores – 4,000 of them across the US. Visiting helped me understand why this matters. In the residential market, the single biggest problem in closing a sale is getting customers to choose a colour. We’ve all been there. That’s a massive time-suck. For decorators, it’s also a big cost-suck as they’ll quote a lot of jobs but often fail to convert because Mr and Mrs Doe can’t decide on a shade of beige. Sherwin’s retail stores show customers different tints and finishes, helping coax them into a purchase.
Another factor that’s reassuringly difficult for rivals to match is precise and reliable deliveries. If I’m a painter, I want the paint to be dropped off when I arrive on site at 7am. I don’t want it before that, or it will wake up the dog, and I don’t want it later, or I can’t start work on time. Sherwin-Williams’ delivery network is even slicker than Amazon’s at getting paint to the right job at the right time, with the right colour code.
Turning to RPM, its top products include the coating Rust-Oleum and a line of sealants and adhesives, so it’s a surprise to find it welcomes potential investors in a chintz-curtained neo-classical mansion in a Cleveland suburb. The leather boardroom chairs are backed with brass plaques featuring the names of previous occupants.
RPM has a 40 per cent US market share in industrial coatings. Its chairman and chief executive, Frank C Sullivan, whom I met, is the grandson of the founder, also Frank C Sullivan. So it’s a family business of the sort often well aligned with our long-term goals.
This is a highly acquisitive, aggressively growth-driven company. It thrived for decades as a collection of strategically purchased building-site brands but, following an activist challenge, it has reorganised its structure for efficiency. I was there to find out whether the centralisation had cost it the entrepreneurial autonomy of its parts.
Growing amid adversity
RPM’s management is proud of the few percentage points of growth they’d managed last year and saw plenty of opportunity ahead from US government-directed infrastructure investment. They also discussed the room for growth in emerging markets and their sharpened research and development department, which should enhance product development.
The fact that these two companies are in Cleveland is a consequence of an oil-based past that’s not coming back. But there are traces of the city’s Rockefeller-era confidence in their understanding that growth doesn’t just happen: you must find ways to make it happen.
Listening to people at all levels of these businesses talking about stretching growth targets, and the creative thought they’d put into how to achieve them, confirmed my hunch. While Cleveland isn’t on many investment managers’ maps, you can still hear echoes from its golden age. Back home in Edinburgh, we’re giving more thought to whether we could turn them into a cash stream for our clients.
Important information
Annual SAINTS dividends
| 2021 | 2022 | 2023 | 2024 | 2025 |
| 12.675 | 13.82 | 14.10 | 14.88 | 15.92 |
Source: Baillie Gifford & Co. Total dividend per ordinary share. Pence per share. Year to December.
Past performance is not a guide to future returns.
Investments with exposure to overseas securities can be affected by changing stock market conditions and currency exchange rates.
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