When I heard Whirlpool’s quarterly report today, I remembered that I had written something on them in July. I rarely talk about individual stocks but I made an exception in this case and here is what I said:

Based upon the warnings of Sears and Home Depot, I am concerned about downside risk in Whirlpool. It took a pretty big 4% hit yesterday, but I am not seeing support until about $94 per share. One of the problems with a stock like WHR is that its narrow product lines (appliances) and lack of publicly traded competitors forces an all or nothing approach. With concerns about both new home construction and weak appliance sales at retailers like Sears, investors are often inclined to sell now and find out the specifics later. Given the 25% rise since April, you have the added temptation of profit taking. I never recommend selling or buying at HEDGEfolios since I have no idea who you are, but my focus is on risk / reward tradeoffs, probabilities and likely directional moves. All those factors are very negative on WHR right now. Note that I have had a DOWN signal on WHR since May 29, 2007 at a price of $111.74.

Note that WHR closed at $108.95 that day and it’s now trading at $82.61. I wish I did that well on all the signals at HEDGEfolios, but that is not the case. And patting myself on the back for the good ones or kicking myself in the ass for the bad ones are not the reasons why I am writing this post.  I wanted to revisit the idea of pureplay stocks that do not have a lot of (or zero) comparable publicly-traded competitors.  Whenever you are long a stock like WHR, please make sure that the macro theme is definitely in your favor.  New home construction requiring new appliances was an obvious problem for this stock but it wasn’t a secret in April when WHR went up 25%.  Pureplay stocks without public competitors are great on the way up.  On the way down, the macro theme can make it very painful.