There’s no secret to it. The market was awash with speculation over a potential takeover bid from German industrial giant Bosch following a Reuters article on the matter. The German company is reportedly looking at bidding for Whirlpool (WHR 1.69%).
The speculation highlights the value case for the stock
Investors and industry management can look at companies differently. While some of the former, particularly Wall Street, stress over quarter-by-quarter earnings being here or there, managements often focus on making long-term strategic decisions at opportune moments.
That’s why it makes sense for Bosch to be looking at Whirlpool potentially.
The American company is undoubtedly going through a challenging period where relatively high interest rates are pressuring homeowners’ discretionary spending. In addition, there’s a natural correction from the lockdown-inspired boom on expenditures in the home in place. Moreover, its promotional activity failed to have the desired impact on sales volumes over the winter, and the company started 2024 with disappointing sales in its core North American major domestic appliance business.
A value situation
The company will likely continue facing challenges in 2024; understandably, investors are stressing over them. However, taking a longer-term view, there’s an opportunity for a company like Bosch to take advantage of Whirlpool’s depressed valuation and acquire a strategic asset that will give them more market share in North America. In addition, Bosch could probably generate significant synergies by merging Whirlpool with its own powerful home goods business.
What should investors do?
Hold the stock if you like Whirlpool as a long-term value situation and are willing to tolerate the potential for near-term risk. However, if you are worried about Whirlpool potentially missing its own guidance this year, or you are holding in the hope of a bid from Bosch or others, then it makes sense to sell the stock.
After all, if you think the key driver of the stock price is a potential bid, you are likely to be trading against people who have more information on it than you.
