Awakened from his wintry nap at dawn on Gobblers Knob on Feb. 2, America’s favorite rodent, oops, woodchuck, proclaimed: “One thing the weather did NOT provide is a SHADOW and a reason to hide. Glad tidings on this Groundhog Day! An early Spring is on the way.” But his track record leaves a lot to be desired. Meanwhile, we like Whirlpool (WHR) here, writes John Buckingham, editor of The Prudent Speculator.
Although the official Groundhog Club proclaims, “Punxsutawney Phil is the seer of seers, the prognosticator of all prognosticators,” his track record leaves a lot to be desired. Per the Stormfax Almanac, Phil has been right just 39% of the time going back to his first recorded prediction in 1887.
While most understand that the weather is unpredictable, we remain perplexed that so many think they can outguess the short-term gyrations of the equity markets. For example, your Editor’s email box has again been cluttered with solicitations from a rival publication that claims to have called every significant market decline since its launch in 1977.
This is nothing new as this outfit has been trumpeting its market-timing prowess for years, with a personal query on how well it has done of a noted investment-newsletter-watchdog back in December 2019 prompting this response, “My mother used to tell me not to say anything if I can’t say something nice!”
Whirlpool (WHR)
Given that the Dow Jones Industrial Average is 10,000 points higher four-plus years later, we doubt the performance story is any different today. Certainly, we realize that one shouldn’t throw stones when dwelling in a glass house, and we concede that we have endured every significant market decline in our 46 years. Yet the watchdog has had nice things to say about The Prudent Speculator on many occasions.
As we have long believed that time in the market trumps market timing and we have always hewed the advice of Charlie Munger, “The first rule of compounding is to never interrupt it unnecessarily,” we have participated in every significant market advance since 1977.
As for WHR, it is the top major appliance manufacturer in the world, with seven brands each having more than $1 billion in sales. Unloved shares are down 30%+ since midsummer 2023, even as the company delivered more than $16 of adjusted EPS last year and posted Q4 top- and bottom-line beats ($3.85 vs. $3.70 and $5.1 billion vs. $4.98 billion).
WHR trades for just nine times management’s 2024 mid-point adjusted EPS projection (which is down considerably from the ‘23 figure) and we continue to like the sizable free cash flow potential. While the company has been divesting businesses in Europe and Africa, we think Whirlpool will benefit from remaining non-North American markets as the rest of the world progresses technologically and Emerging Markets incorporate modern conveniences into daily living. WHR’s dividend yield is also a whopping 6.3%.
Recommended Action: Buy WHR.
