Ted

Goodyear
550 N. 5th Ave, Tucson, AZ 85709
tgoody@email.arizona.edu | (612) 723 - 8934

Harris Associates
111 S Wacker Dr #4600
Chicago, IL 60606

Dear Harris Associates,

After evaluating both companies, Whirlpool Corp (WHR) would be the investment
that I would rather purchase as a Value investor. This company stands out as having
better long-term potential for a number of reasons that lead me to recommend it
over KMX.

The first thing that stood out to me in the stock comparison was that WHRs PE ratio
of 16 is considerably lower than Carmaxs (KMX) PE of 20. This is an important
indicator because it shows that Whirlpool is the better value for the earnings you
are buying. Additionally, WHR is anticipated to have EPS growth of 13-15% in each
of the next two years, where KMX is estimated to have EPS growth of only 7-8%.
New housing starts continue to expand in the US, which should help WHR expand
sales revenue in the next several years. Meanwhile, there is considerable concern
that auto sales in the US may be reaching a peak level in 2016, which could limit
sales growth for KMX both in terms of number of cars sold and a lower average
selling price going forward if more used cars are sold.

Taking earnings expectations into account, the forward PE for WHR looks to be 12,
while the forward PE for KMX is 18, which is just slightly above the forward PE for
the S&P 500 average. This tells me that the KMX stock is pricey compared to the
much more reasonable WHR. Another area of concern for KMX is the growing 75%
LT Debt to capitalization, versus WHR at only 35% and relatively stable. KMXs
reliance on increasing debt for expansion makes this a riskier investment.

Another important aspect to look at as a value investor is the dividends paid to its
shareholders. Whirlpool is currently paying its shareholders 2.20% at current
prices, while KMX pays no dividend. This leads me to believe that the price volatility
of WHR will be lower than KMX. Additionally, with the expected earnings per share
growth of 13-15% in each of the next two years, it is conceivable that dividends will
be able to be increased, providing a good balance between capital gains and
dividend income in total return for WHR.

Due to stronger fundamentals and an industry that offers more growth potential, I
recommend the purchase of WHR over KMX

Sincerely,

Ted Goodyear