Alternatives: Electrolux and Sears
The largest publicly-traded pure appliance play other than Whirlpool is Electrolux, which is just slightly smaller in terms of market cap. Electrolux pays a significantly higher dividend yield (3.8% vs. 2%), but that is the only reason I see to like it better. Electrolux trades for 22.6 times trailing earnings with almost the same projected growth rate as Whirlpool. Additionally, the company has a higher level of European exposure, which creates added risk and uncertainty in the near future.
Another option is to invest in a company that only gets some of its revenue from sales of appliances, such as Sears Holdings Corp (NASDAQ:SHLD), which controls the Kenmore appliance brand. The actual products are produced by other manufacturers (including both Whirlpool and Electrolux, among others), and make up a considerable part of Sears Holdings Corp (NASDAQ:SHLD)’ sales. The upside to an investment like this is that you get exposure to other aspects of retail than just appliances. The downside is that Sears is a very speculative play at this point, having lost money for the last few years and projected to continue to lose money (but smaller losses) until 2015, at least.
However, if Sears Holdings Corp (NASDAQ:SHLD) manages to turn things around it could be the big winner out of this group. Sears has revenues of about $40 billion annually and trades at a market cap of just $4.6 billion, which tells me that it wouldn’t take that much of a profit margin to add significant value to the company.
Buy, sell, or hold?
As far as Whirlpool Corporation (NYSE:WHR) goes, I think it is clearly the best long-term investment candidate in the appliance sector. With a low valuation and excellent growth potential, this could be one of the best plays on the housing recovery in the U.S. that finally appears to have arrived.
The article Why Is This Company an Excellent Play on the Housing Recovery? originally appeared on Fool.com and is written by Matthew Frankel.
Matthew Frankel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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