Whirlpool Corp. (WHR - $152)
Whirlpool (WHR) is the leading player in a fragmented global appliance market. The company has a dominant position in the North American market, and the strengthening U.S. housing recovery should increase demand for North American household appliances. Replacement demand is the largest component of Whirlpool’s sales, so an aging base of appliances in the U.S. should lead to further revenue growth as products purchased during the housing boom reach the end of their useful lives. In addition to these revenue tailwinds, Whirlpool’s profitability is also improving as a result of considerable cost cutting and a shift in their sales mix toward more attractive categories. While it is often overlooked, Whirlpool’s KitchenAid small appliance business grows faster and contributes higher margins than the rest of the business. When we consider strong revenue growth, improving profitability and the growing contribution from better categories, we see an attractive business that is selling at a considerable discount to the S&P 500 P/E multiple.
From Bill Nygren (Trades, Portfolio)'s Oakmark Fund - Third Quarter 2014 Letter.
