Whirlpool (WHR): More than Just Treading Water

Today on CNBC’s Street Signs, Jim Cramer pointed to a company that was easy to overlook during the rally in financials. That company was Whirlpool (WHR), who presented at the Raymond James (RJF) Institutional Investor’s Conference. While so many had left this stock for dead–down more than 75% in the last 6 months–their presentation showed a very different side of their story:

“Overlooked yesterday, I mean, everyone had a lot of things but I think one of the main things was a conference, Raymond James conference. Whirlpool told a story, a lot of people thought Whirlpool was going to be in a huge amount of trouble. Whirlpool talked about cash flow; they did a great job in the presentation. They were talking about raw costs coming down. Stock was up the most in years and it’s up again. I urge people to go to the Whirlpool’s web site, where they can pull this conference call, and you will see what I mean. This was a very big deal because Whirlpool had been counted out, and it shouldn’t. Like we said, the Chinese have to buy washing machines and dishwashers…The internet accounts for 50% of Whirlpool’s business, huge percent, is simply your washer and dryer breaks down, you need a new one. And they do tend to break. As the people, who charged me 500 for mine three weeks ago, already know.”

WhirlpoolThis conversation alerted us to a stock that doesn’t get very much attention. Whirlpool is up more than 25% in just the last two trading days! According to Google finance Whirlpool is 95% institutionally owned, so it seems that they presented at the right conference to drum up some more interest among the pros. At Ockham, we believe Whirlpool is Undervalued because at current price levels, it is trading 30% below the low end of the range we would expect to see in price-to-sales. Price-to-cash earnings are also quite appealing on when compared to historical valuations. As the company mentioned in their presentation, they are still generating significant cash flow as well. Not to mention, the company’s dividend yield is over 7% and there seems to be little risk of them slashing it. The smart money seems to be flocking to this stock, and with that in mind, it looks undervalued here as well. If there is a pull back in price over the next few days, Whirlpool could make a nice addition to an individuals portfolio as well.

Whirlpool: More than Just Treading Water

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Ockham Research is an independent equity research provider based in Atlanta, Georgia. Security analysis at Ockham Research is based upon the principle known as Ockham's Razor, named for the 14th- century Franciscan friar, William of Ockham. The principle states that a useful theory should utilize as few elements as possible, because efficiency is valuable. In this spirit, our goal is to make the investing environment as simple and understandable as possible, yet no simpler than is necessary.

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