Ken Heebner increases stake in Whirlpool

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May 18, 2015
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Ken Heebner (Trades, Portfolio) is a growth oriented investor who co-founded Capital Growth Management, a money management firm with more than $6 billion under management. Last quarter, he increased his position in Whirlpool Corporation (WHR, Financial) by buying 597,000 shares. As of March 31, 2015, he was holding 742,000 shares of the company.The following chart shows his holding history in the company.

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Here's an analysis of the company in detail.

Whirlpool Corporation, the world’s leading manufacturer and marketer of major home appliances, was incorporated in 1955 under the laws of Delaware. Whirlpool manufactures and markets a full line of major home appliances and related products. The company's principal products are laundry appliances, refrigerators and freezers, cooking appliances, dishwashers, mixers and other portable household appliances. It also produces hermetic compressors for refrigeration systems.The company's main competitors include Bosch Siemens, Electrolux (ELUX A)(ELUX B), General Electric (GE), Haier (HRELY), Kenmore, LG , Mabe and Samsung.

Whirlpool is showing strong earnings growth. The company's adjusted EPS has more than doubled from $5.06 in FY2012 to $11.39 in FY2014. Going forward, sell side analysts are expecting the company's adjusted EPS to reach $12.36 in FY2015 and $15.28 in FY2016.

Whirlpool has multiple opportunities for growth and margin expansion going forward. The first one is geographical expansion. The company has recently acquired Hefei Sanyo and Indesit which will help it improve its business position in both Europe and China. In addition, the low appliance penetration rates and real wage growth in emerging economies like Brazil, China and India point to long-term healthy demand growth for the company's products. Second, the company continues to focus on growth beyond its core and is launching new models with innovation across all product lines. This will help it grow in mature markets. And finally, the company's ongoing cost reduction coupled with volume growth are expected to help its margin growth meaningfully going forward. So in total, the company is on track to create strong value going forward.

For the current year, the company has provided an EPS guidance in the range of $12 to $13 which represents ~10% improvement versus its 2014 results. In the U.S., improvements in housing trends, consumer sentiments and discretionary spending are expected to translate into increased appliance demand, while in Europe the company is set to benefit from recovering margin environment. Although recent gains in the U.S. dollar versus other currencies are expected to be headwinds, the company will more than offset it with improved productivity, accelerated integration activities and improved pricing. In addition, declining raw material prices are also expected to help the company's margins.

Whirlpool is trading at 15.19 times FY2015 EPS. According to sell side estimates, its EPS is expected to increase 10% in FY2015 and 23% in FY2016. It has a dividend yield of 1.40%. I believe the company is a good buy at current levels.

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