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Icahn Doesn’t Clean Up on Clorox

Iconic investor pulls out -- but don't get low on Clorox yet


So far, it’s been a good year for activist investor Carl Icahn. Of course, when you’re worth $12.5 billion, this usually is the case.

But how good has 2011 been? First of all, Icahn scored a $435 million profit on his stake in Motorola Mobility (NYSE:MMI), which recently was purchased by Google (NASDAQ:GOOG).

Icahn also knows how to protect his downside. To this end, he put short positions on the S&P 500. The result: a $100 million gain.

Great, huh?

Yet despite all the big trades, Icahn is far from perfect. Just take a look at Clorox (NYSE:CLX). He took a 9.4% position in the company then went on the attack, trying to unseat the board. He thought Clorox would be a good buyout candidate for a major player like Procter & Gamble (NYSE:PG), Colgate-Palmolive (NYSE:CL) or Kimberly-Clark (NYSE:KMB).

Unfortunately, the strategy fizzled. Icahn has pulled his slate of directors and will not make a bid for Clorox.

Why? Basically, the company’s shareholders think this is the wrong time to sell. After all, the global economy is slowing down and the financial markets are in disarray.

But the decision also points to something else that’s interesting: If Clorox’s investors want to hold on, might this be a bullish sign?

Keep in mind that Icahn was willing to offer as much as $80 per share for the company — and he is not known for paying hefty premiums. The current stock price is only $64.39.

No doubt, Clorox has a tremendous portfolio of brands. Examples include Armor All, Kingsford, Hidden Valley and Glad — all top dogs in or near the top of their market segments. And Clorox has continued to invest in marketing and new innovations, such as organic and natural product offerings.

Clorox’s strong cash flows also allow for a hefty dividend, which currently is at 3.6%. All in all, with the valuation at roughly 16 time earnings, the stock looks attractive for those investors who take a longer-term view on things.

Tom Taulli is the author of “All About Short Selling” and “All About Commodities.” You can also find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.

Article printed from InvestorPlace Media,

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