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(B)(N) Washing Machines – The Whirlpool, LG and Samsung Story

May 4, 2017
Washers

Coming clean on Whirlpool

Drama. The Whirlpool Corporation of Benton Harbor, Michigan, has successfully pressed “dumping” charges on its two of its major off-shore competitors, LG Electronics Incorporated and the Samsung Electronics Company and, as a result, the price of washing machines is likely to go up (Associated Press, January 10, 2017, Whirlpool and its Ohio workers win trade case over Samsung, LG washing machines).

Of course “up” doesn’t sound good when it comes to price but you might have noticed by now that “price has no mass” neither in stocks nor things and just about anything can be bought for 30% off today, and even more, including “free” at the curb, and that consideration doesn’t factor in to the due deliberations of the U.S. International Trade Commission or the conscience of the politicians who will call anything a “win” if it looks like one.

But we’re not impressed by on-shore companies that find some mote in the eye of their off-shore competitors which just seem to be making better products according to the consumers, like us, and there is, undoubtedly, a lot of foreign content in both Whirlpool and GE General Electric because we don’t make that kind of electronics on-shore anymore and all of these companies compete in the same international markets baring protection or sanctions (Consumer Reports, December 27, 2012, Finding appliances made entirely in America can be tricky).

And as a consequence, we’re not sure whose ox is being gored (Exodus 21:36) except by declaration.

The Dirty Laundry

Of course LG is dumping (please see below) and it’s been adjudged so but that also shows-up on its balance sheet with a recent 0.4% earnings return on the shareholders equity (the net worth) in contrast to Whirlpool (18.7%) and Samsung (10.7%) and the Whirlpool number (18.7%) is certainly high and beats what most investors (and companies) can get on their money.

On the other hand, the stock price for Whirlpool is down (-5%) so far this year (but still more than four times as much as in 2012) whereas LG is up +45% and Samsung is up +13% after a run-up of almost +60% last year.

And despite all of the noisy hand-wringing in Washington, the (B)-class portfolio in these three companies has been churning-out +20% per year for the past five years and will likely do +28% this year (the dividend yield 1.16% plus twice the normalized annual volatility 2×13.5% most of which is due to Samsung (14%) on gains of over +75% in the last two years) and we’re already good for +7.2% in the first quarter and +8% through today on a flat holding (same amount of money in each of them).

Nor is any of that considered to be unfair but it isn’t showing-up on the Federal radar and, therefore, we don’t know, and probably can’t know, whose ox is being gored by “dumping” except by the more obvious defendant who loses their case; please see the charts below for more details (and click on them and again to make them larger as required).

Exhibit 1 The Washing Machine

TGX WHR Whirlpool Corporation

Figure 1.1: WHR Whirlpool Corporation (B+)

TGX 066570 LG Electronics Incorporated

Figure 1.2: 066570 LG Electronics Incorporated (B+)

TGX 005930 Samsung Electronics Company Limited

Figure 1.3: 005930 Samsung Electronics Company Limited (B+)

For more examples of the (B)-class portfolio in difficult markets, please see our recent Posts on”The “W” Syndrome“, Steel,  Green Energy, UFOs and the High Flying Techs, and The Coal War which is heating-up again now; and the Canadian Mines have also taken-off – please see our recent Post “(B)(N) Extreme Economics – The (New) Canadian Mines” for a heads-up on that as well as The Great Rotation & Twenty Hot Canadians 2017.

And for more information and examples of the Free Market Yield and the terms that we have used above, please see our Posts “(P&I) The Dismal Equation (Ecclesiastes 9:1)” and “(B)(N) S&P 100 Volatility Risk and The Full Moon” and “(B)(N) NASDAQ 100 Volatility and The Stone Bunnies“ and for an introduction to The Barometer “(B)(N) What’s A Girl To Do” or “(P&I) The Swiss Franc Debacle“.

And for more information on real “risk management” in modern times and additional references to the theory and how to read the charts and tables, please see our Post, The RiskWerk Company Glossary and “(P&I) Dividend Risk and Dividend Yield“, and our recent Posts “(P&I) The Profit Box” and “(P&I) The Process – In The Beginning“; and we’ve also profiled hundreds of companies in these Posts and the Search Box (upper right) might help you to find what you’re looking for, such as “(B)(N) TLM Talisman Energy Incorporated” or “(B)(N) ATHN AthenaHealth Incorporated” or “(B)(N) PETM PetSmart Incorporated“, to name just a few.

And for more applications of these concepts please see our Posts which rely on the Theory of the Firm developed by the author (Goetze 2006) which calibrates The Process to the units of the balance sheet and demonstrates the price of risk as the solution to a Nash Equilibrium between “risk-seeking” and “risk-averse” investors within the demonstrated societal norms of risk aversion and bargaining practice. And for more on The Process, please see our Posts The Food Chain and The Process End-Of-Process.

And for more on what risk averse investing has done for us this year, please see our recent Posts on “(P&I) The Easy (EC) Theory of the Capital Markets” or “(B)(N) The Easy (EC) Theory of the S&P 500“, and the past, The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class actionLa Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in AmericaBig OilShopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”). The Canada Pension Bond®™, The Medina Bond®™, The Barometer®™, the Free Market Yield®™ and Extreme Economics®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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