Short Whirlpool (WHR) for Minimum 30% Return
Sep 11th, 2008 | By Adam Lass | Category: Featured, Financial NewsAs the housing market slumps it should take anything related to building or furnishing with it.
However, the stock of home appliance maker Whirlpool (NYSE:WHR) has risen 6.4% in the year to date despite razor thin margins and a wider downturn.
Wave Strength Options Weekly editor Adam Lass says this is a great opportunity to make at least 30% with a simple short play.
Buying strategic put options could increase these gains up to 118%.
More from Adam in today’s Taipan Publishing:
My partner Bryan Bottarelli’s analysis of Whirlpoolmakes perfect sense:
When I look at Whirlpool’s business model, I see a company with a $6.64 billion market cap, trading at a P/E ratio of 12.19, while making a razor-thin profit margin of 2.89%.
In strong economic times, making 2.89% on a high-ticket item like appliances makes you a lot of money. But in the heart of a market recession (like we have right now), I can’t see a company like WHR being able to maintain any upside momentum.
After all, millions of unsold U.S. homes are currently sitting on the market with brand-new WHR appliances. I would think that the market needs to work through this inventory before WHR can think of receiving a substantial amount of new sales. And therefore, the forward outlook, to my eye, is very weak.
Now WHR stock is a bit of an oddity right now. Most everyone else connected with the housing and home wares biz have been well and truly stomped on.
You wouldn’t expect a builder like Lennar (NYSE:LEN) to be up, and indeed it is not. You wouldn’t advise a friend to buy shares of a joint that sells nails and furnishings like Home Depot (NYSE:HD).
But WHR is still vainly trying to hold on to its 2008 highs. My Wave Strength Options Weekly charts tell us that even a simple short play ought to be good for some 30% gains over the next few months.
However, the puts that Bryan and I recommended to WOW readers stand to gain as much as 118% off that same 30% drop.
Certainly something to cheer you up as you fold the wash, eh?
Source: Can Long Lines, Broken Machines and a Botched Election Sell Dishwashers?
Advertisement
Ballooning crude prices and shifting energy technologies have pushed the world to the brink of a global rush on natural gas. Here are the 3 petro-companies one ace analyst predicts are poised to cash in the most — including one that recent history proves could quickly yield 190-fold gains. Get all the details on these companies, and the maverick who recommends them, right here...
Adam Lass is the creator of the 