Whirlpool (WHR): A good value with excellent prospects for recovery
By Timothy Lutts, Chief Analyst, Cabot Stock of the Month
From Cabot Wealth Advisory 1/18/16 Sign up for Cabot Wealth Advisory—It’s free!
A lot of people have been selling stocks, and the selling has accelerated as more and more people have joined the movement.
Nevertheless, there are very good reasons to hold onto stocks. One reason to hold on is if you’ve bought the stock based on a proven value-based investing discipline and that discipline tells you to hold on.
For example, Cabot’s ace value investor, Roy Ward, recently recommended Whirlpool (WHR) to his readers. Whirlpool, as most investors know, is the world leader in the home appliances business.
WHR has fallen 35% over the past year, and Roy says it’s a good value with excellent prospects for recovery, based on the fact that homebuilding is strong, while materials costs for Whirlpool are still falling. Plus, the stock provides a yield of 2.7%.
As always, Roy provided his readers with a Maximum Buy Price and a Minimum Sell Price (target) for WHR, and if you’d like to know them, all you need do is become one of Roy’s loyal readers. Click here for more information.
Whirlpool (WHR): A stock Warren Buffett should own
A stock that I think Warren Buffett should own is Whirlpool (WHR). The stock is undervalued with a sufficient margin of safety, high profit margin and the company manufactures products that are easy to understand. Berkshire doesn’t own the stock yet, but I think Mr. Buffett will likely buy a big chunk soon. My suggestion: Buy now before Mr. Buffett drives the stock substantially higher!
Here's my analysis on the stock.
Whirlpool (WHR: Current Price 162.27) is the largest manufacturer of home appliances in the world. Whirlpool’s products include laundry appliances, refrigerators and freezers, mixers and cooking appliances and dishwashers. The company’s brand names include Whirlpool, Maytag, KitchenAid, Roper, Jenn-Air and Amana. The company is based in Michigan and was founded in 1955.
Whirlpool’s sales in North America in 2015 are unchanged from a year ago, but profits are advancing due to cost cuts and lower raw material costs. Sales growth in Europe and China is solid, but sales in Latin America fell 27% because of the recession in Brazil. Whirlpool has cut production to keep costs in line with lower sales.
Whirlpool’s acquisition of American Dryer in July is adding meaningful sales and earnings, and offers multiple expansion opportunities. Whirlpool has also entered into a contract to supply Ryan Homes, the nation’s fifth largest homebuilder, with all appliances for new homes. Whirlpool has additional ventures and acquisitions pending.
Sales rose 12% and EPS advanced 11% in the past 12 months ended September 30, 2015, after posting minimal gains in the previous three years. During the next 12 months, sales will rise only 6%, hampered by the severe slowdown in Brazil, but EPS will surge 19% to $14.25, aided by lower raw material costs and strong contributions from American Dryer.
Whirlpool’s stock price has lost 27% during the past eight months, mostly due to flat earnings results in the first half of 2015. EPS growth accelerated in the third quarter, though, and will continue to accelerate during the next several quarters. WHR sells at 13.3 times trailing earnings, its balance sheet is solid and the dividend yield is 2.3% and rising. The company’s return on equity of 16%, a measure of profitability, is also attractive.
WHR will likely climb to my Minimum Sell Price target within one year. I recommend buying at the current price.
I will continue to follow Johnson Controls, Whirlpool, and many other undervalued, high-quality companies in Cabot Benjamin Graham Value Investor. For information on how to subscribe, click here.
Whirlpool (WHR): Benefiting from the improving economy
By Paul Goodwin, Editor of Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 11/24/12 Sign up for free Cabot Wealth Advisory e-newsletters
Whirlpool (WHR) is an appliance maker that's been around since 1898 and now owns the Whirlpool, Roper, KitchenAid, Amana, Maytag and other brand names.
Whirlpool's revenue growth has been very slightly negative for the last four quarters, but the improving economy has allowed the company to stop the heavy discounting that was necessary to get sales. As a result, the last three quarters have featured earnings growth of 120% in Q1, 91% in Q2 and 521% in Q3, as improved margins have worked their magic.
Investors like the linkage between Whirlpool's appeal and the strengthening economy (especially the housing market) and the company's 2.0% forward annual dividend rate.
2000 North M-63
Benton Harbor, Michigan 49022-2692
|Index Membership: N/A
Sector: Consumer Goods
Full Time Employees: 68,231
11/23/15: Whirlpool (WHR): A stock Warren Buffett should own
11/24/12: Whirlpool (WHR): Benefiting from the improving economy