The last time I was writing about David Tepper was 14 months ago when he was on CNBC and talking about loading up on China stocks. That proved to be a very good trade with shares putting in huge gains in one of the best trades of the year.
He was already a hedge fund legend before that and used a significant part of his billions to buy the Carolina Panthers NFL team.
Late yesterday, he filed his latest 13F disclosure, which shows holdings of his Appaloosa Management fund as of Sept 30.
The name that jumps out is Whirlpool, where he’s bought nearly 10% of the company, making it his third largest position. You’re probably familiar with the company, which is 114 years old and owns brands like Maytag, Bauknect and KitchenAid , as well as its namesake.
it’s a company that I’ve written about extensively over the years but not as a stock. It’s because appliance spending is a good economic barometer.
Earlier this year shares tanked as the company warned about the housing market.
“Resilient replacement demand creates a solid foundation for industry volumes, while consumer discretionary demand continues to be negatively impacted by elevated mortgage rates, resulting in weak existing home sales,” said CEO Marc Bitzer.
My first instinct is that this was a cyclical call on a housing recovery. That could certainly be the case but what’s curious is that the company continues to see weakness, though it has touted improved market share in North America.
Despite a rout in the stock, it’s also not particularly cheap on most metrics.
- Forward P/E 10x
- P/B 1.5x (not bad given the brands)
- EV/EBITDA 9.5-10x vs 7.9x long term avg
- 5.5% dividend at today’s price after cutting the dividend in July
The one line it screens very cheap on is price-to-sales and that could leverage earnings if it can improve on margins, which are brutal right now due to high competition, a depressed housing market and tariffs.
Tepper is often a distressed investor and his “finding value in distress”and this could be that kind of play if they can improve margins. I do worry that their brands are seen as midrange compared to Samsung/LG/Haier and others that have better positioning on devices that will work with AI and the connected home.
Tariffs are another possibility.
“We feel very good about the organic growth opportunities adding to ’26 in North America irrespective of what the market does,” said WHR’s CEO in the latest conference call.
A big reason for that is that they have extensive manufacturing operations in the United States. They have been a Trump-protected company and the administration is focused on that kind of company. In addition, the 2025 numbers might be negatively impacted by stockpiling ahead of tariffs by competitors. That inventory is running out and the company has repeatedly bemoaned a highly competitive pricing environment. Going ahead, foreign manufacturers may struggle to compete with them in the US market due to tariffs, though the company has flagged tariff evasion among competitors, something I think is a huge problem. They manufacture 8 out of 10 appliances they sell in the US.
The company is deleveraging right now with some unit sales (India could be a catalyst in December) and it has some tailwinds from tariffs and (eventually) housing but it’s not an obvious screaming buy on valuation. What’s clear here is that Tepper is very early but he’s also 13% underwater on his disclosed price, despite today’s 5% rally in shares based on Tepper’s disclosure.
The risk here is that the balance sheet stays weak (6x debt/EBITDA), tariffs are struck down in the Supreme Court and that competition stays high, limiting margins.
The company itself is highlighting a target of 7% free cash flow as a portion of sales, which would be +$1 billion on a $5 billion market cap — very attractive indeed. But that target was for 2026 and that’s looking highly unlikely, given negative FCF of 907m in the last quarter due to tariffs and an inventory build. Guidance for this year is now just 1.25% from 2.3% in 2024.
Here is what the company itself says for how it will turn around:
First, we are strengthening our product portfolio with over 30% of our North American products transitioning to new products in 2025. This compares to less than 10% product renewal in a normal year.
Secondly, our strong U.S.-based manufacturing footprint positions us as the net winner of new tariff and trade policies. Thirdly, turning to the U.S. housing market, we continue to see strong underlying fundamentals that point to a likely multiyear recovery.
Overall, this is a strange investment for Tepper. It fits his style of investing in distressed assets but doesn’t really fit his portfolio, which is heavy on China and Mag7 names. One exception is American Airlines, which is also discounted and struggling under high debt but is an interesting buy because I also think there are tailwinds for airlines. Another old school heavily-indebted manufacturing company he bought was Goodyear Tires, which might also be worth a look as could benefit from tariffs and has been talking about the lagged impacts of imported inventories.
Ultimately, we can’t know why Tepper is making a big bet on Whirlpool until he speaks about it but I’ll be curious to find out the answer. One final note is that a signficant portion of the shares are sold short (17% of the float), so there could be a squeeze at some point.
This article was written by Adam Button at investinglive.com.