Intrinsic Value Assessment: Whirlpool Corp (WHR)

Hey, The Investor’s Podcast Network Community!

In our March 3rd, 2021 newsletter, Do You Have An Advantage Over Wall Street?, I wrote about Peter Lynch’s investment strategy of “using what you already know to make money in the market” and how AutoZone might be a good example of his strategy for some investors.

In this week’s newsletter, we’re going to take a look at another company that might fit this strategy.

As I sat down at my computer to look for a company to analyze for this week’s Intrinsic Value Assessment, I had no companies on my radar and was starting from scratch.

Thankfully, our TIP Finance tool helps me find my next ideas. 

I opened up the tool and started using the Filter function. The Filter function is broken down into Large Cap, Mid Cap, and Small Cap. I chose to start looking at the list of Large Cap companies.

The first thing I look at is the “Sector” because this is an easy and quick way for me to filter out companies that aren’t within my circle of competence. For example, the fourth company listed in the Large Cap list is in the “Healthcare” sector — Bio-Rad Laboratories Inc (BIO). I know which sectors I can generally understand well, and which ones I can’t, so I am able to quickly scroll through the list and filter out companies I likely couldn’t understand due to its sector.

As I’m scrolling through the list, once I find a sector that I know is within my circle of competence, I then look at the company to see if it’s one I already know, or think I could understand, and I check what the TIP Multiple and Potential Yields are, as well as the momentum status. 

During this week’s research, I scrolled through the list when I came across a company in the “Consumer Cyclical” sector, which is one that I felt I could understand well. It was also relatively high on the list, meaning the TIP Multiple was low and therefore the Potential Yield was high. Then, I looked at the company itself.

It was Whirlpool.

As a homeowner and real estate investor, I’ve bought my fair share of appliances. Some of which were Whirlpool, some that were not, all giving me different perspectives on the appliance industry. 

The TIP Multiple and Potential Yields were satisfactory, the momentum status was green, and I knew I could understand the company well, so I thought back to Peter Lynch’s strategy and decided to dive in.

Having made the mistake of buying far too many “falling knives” in my early days as an investor, mistaking those opportunities as value plays, my first point of research after deciding to analyze the company was to look at its momentum in the TIP Finance tool.

Participating in too many falling knife situations, as many new value investors do, the Momentum feature in TIP Finance has become one of my favorites and is a must-have for me when making investment decisions. 

The momentum status of Whirlpool’s stock is currently green and has been for about nine months now. While this doesn’t completely remove the possibility of a falling knife situation, it does help alleviate some of my concern.

With Whirlpool satisfactorily passing the momentum status bullet point on my investing checklist, I dove deeper into the company’s financials using the Fundamentals feature in TIP Finance. I dove into analyst’s research reports, read 10K’s and 10Q’s, read third-party site’s reviews of home appliance brands, did broader industry research, and even looked at Census data for real estate trends.

From there, I calculated the expected annual rate of return over the next 10 years using the Intrinsic Value Calculator in TIP Finance by using my research to generate the input values for the calculator. 

You can read the full Intrinsic Value Assessment of Whirlpool (WHR) here.

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