Top Picks 2016: Whirlpool

01/20/2016 7:00 am EST


Roy Ward

Chief Analyst, Cabot Benjamin Graham Value Investor

Our Top Pick for 2016 is the largest manufacturer of home appliances in the world, notes value investor J. Royden Ward, editor of Cabot Benjamin Graham Value Investor.

Whirlpool (WHR) acquired American Dryer in July, which is adding meaningful sales and earnings, and offering 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’s 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 the lower sales.

The stock price has lost 27% during the past eight months and now presents investors with an excellent buying opportunity.

EPS growth accelerated in the third quarter, though, and will continue to accelerate during the next several quarters.

Sales will rise only 7% in 2016—hampered by the severe slowdown in Brazil—but EPS will surge 17% to $15.05, aided by lower raw material costs and strong contributions from American Dryer.

Whirlpool sells at 11.9 times latest EPS, its balance sheet is solid, and the dividend yield is 2.4% and rising.

I recommend purchase of the stock at the current price. I would recommend selling when WHR rises 34% to my sell target of $204.60, within 12 months.

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