Stay Cool with Appliance Companies
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
For most people, appliances are just about the most boring thing ever. How frequently do you really think about your fridge, your dryer or your vacuum cleaner when they're working fine? Probably not very often. But investing is all about being bored and getting paid in a slow and steady fashion. The great thing about being a decent investor is that the annual reports put you to sleep, and you can sleep through all the turbulent times that have the day traders worried sick. The following are some good representatives of true boredom in the appliance business.
I like National Presto Industries (NYSE: NPK) because it's pretty well diversified. What's particularly interesting is what it's diversified in: small household appliances, ordnance and ammunition, and adult incontinence. While I'm not usually in favor of diversification, I like how this company has pretty much every base covered: defending young warriors in the field, helping families keep well fed (recognize the Sald Shooter, Pizzazz or Fry Daddy brands?), and helping the most mature members of society keep their dignity despite failing constitutions. No matter who you are, you are served by National Presto products. With this much branding, a solid 10% profit margin and more than a hundred years of history, I'm confident that this is a company worth looking into further.
I can tell you right now that I don't like Spectrum Brands Holdings (NYSE: SPB) very much. I try to be positive, but in this case I'm willing to fail. Spectrum can't even decide where to locate its corporate headquarters, moving to Georgia before flip-flopping back to Madison, Wisconsin, traditional home of Spectrum's Rayovac. That isn't even considering the companion animal and aquarium lines that are housed in Cincinnati, Ohio.
Loaded down with debt, barely scraping profitability, and having to merge with the Russell Hobbs company (makers of the awesome George Foreman Grill) to keep from sliding back into Chapter 11, I don't have much that's nice to say about Spectrum Brands. Their P/E ratio is in the triple digits, their main "victory" of 2010 (pre-merger) was that their EBITDA and sales grew for an entire year, and the company owns dozens of brands that they can't even sell because their bankers consider the brands too valuable. When the bean counters have taken over, it's not usually a good thing. I would strongly recommend avoiding Spectrum until it gets things together.
Now for something totally different: Whirlpool (NYSE: WHR) is a badass company. With a solid 15.53 P/E ratio (not too shabby when the S&P 500 is around a 17 P/E), the largest appliance manufacturer in the world might be the only good thing going for business in Michigan these days. With its handy 2.1% dividend yield, multinational operations ,and brands I can't even pronounce, Whirlpool has things pretty well handled. I even love how Whirlpool has the little things, like a 24-hour helpline and brands in South America and Germany. They're also super-awesome at diversity, with a large number of diversity networks and a score of 100% on the Corporate Equality Index in terms of the lesbian/gay/bisexual/transgendered community. I can't say enough good things about this company.
Of course, not all appliance companies are old. For example, iRobot (NASDAQ: IRBT) was only founded in 1990. On top of serving both the military and home consumers, iRobot has a lot of diversification. I like that the company intentionally allows and encourages its customers to make modifications to the robots it produces, kind of like an anti-Apple. With a solid 7% profit margin and a lot of awesome products (that includes a robotic gutter cleaner that I may be looking for on eBay tonight), I like iRobot. It does sound like the kind of company that's likely to get swallowed up, though, which I hate. It broke my heart when I found out that Focus Media Holding was likely to be acquired.
I love having machines that wash and dry my clothes, clean my floors and gutters, and just generally let me the lazy person I've always dreamt of being. Add in the possibility of a dividend, and I might just squee with glee.
pongun has no positions in the stocks mentioned above. The Motley Fool owns shares of National Presto Industries. Motley Fool newsletter services recommend iRobot . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.