Best Stock on the Market

Put Spread on WHR on 2/22/2013

Whirlpool Corporation (Whirlpool) is a manufacturer and marketer of home appliances. Whirlpool operates in four segments: North America, Latin America, EMEA (Europe, Middle East and Africa) and Asia. Whirlpool manufactures and markets a line of home appliances and related products. Its principal products are laundry appliances, refrigerators and freezers, cooking appliances, dishwashers, mixers and other portable household appliances. The Company also produces hermetic compressors for refrigeration systems. It is a producer of home appliances in North America and Latin America and has a presence in markets throughout Europe and India. Its portfolio of brands include Whirlpool, Maytag, KitchenAid, Brastemp and Consul.

 

Stockwinners is Bearish on this name for the following reasons:

  1. We traded this name name around two weeks ago and closed the trade with a healthy profit after a week. It is  agreat entry point to put the trade back on after the bounce that Whirpool has had . Our  original thesis was related to stretched valuation, poor technicals, and my view that the market had become too optimistic about the American housing market’s impact on housing-related stocks.The following is a summary from the original trade publish on Feb 1,2013
  2. The improvement in margins has in large part been due to pricing increases in the U.S., which has actually decreased unit sales.  That’s been a boon to earnings, but might be a warning for future top-line growth.
  3. International outlook not so rosy.  Europe is still in the doldrums.  Latin America has been stronger, but the company is overly exposed to Brazil.
  4. The technicals look tired.  The 1 year chart shows declining momentum on each thrust higher in the stock (green arrow), and yesterday’s push to new highs puts the stock close to the 115-120 area that has acted as resistance twice in the last 6 years. 
  5. The trade offers an attractive risk/reward ratio.

Trade

  • Buy 1 April $105.00 Put at $3.20
  • Sell 1 April $95.00 Put at $0.95
  • For a net debit of $2.25

Profit/Loss Analysis

  • Breakeven at $102.75
  • Maximum profit is $775.00 at strike of $95.00
  • Maximum loss is ($225.00) at strike of $105.00

Closing Summary

  • Sold 1 April $105.00 Put at $0.00
  • Bought 1 April $95.00 Put at $0.00

Position closed on 4/19/2013 at price of $0.00 with a -100.00% loss in 55 days.

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