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Billionaire Bill Ackman Is up to Something, but What?

Thursday, 12 Jul 2012 | 5:48 PM ET

On Thursday investors were wondering if activist investor Bill Ackman was about to work his magic and unlock major value in P&G.

Ackman is celebrated on Wall Street for buying big stakes in companies and then agitating for changes that he thinks will augment shareholder value.

Because of his reputation, shares of P&G popped Thursday on news that Ackman has built a large stake in the consumer giant.

But what kinds of changes, exactly, is Ackman looking for? The Fast Money traders have a few thoughts.

Break-Up

Top trader Joe Terranova, chief market strategist for Virtus, says if history is any indication Ackman will be looking to break-up the company. “That’s what he did with Fortune Brands,” Terranova reminds.

The question you have to ask yourself is, can he do it? P&G is a goliath. “Whether you think he can or can’t, that’s the reason to follow him in or not.”

That’s Terranova’s thesis. Trader Karen Finerman, president of Metropolitan Capital, isn’t so sure.

Ackman's 'Biggest Ever Active, Initial Investment'
Dissecting the day's major business news, with the Fast Money traders. Linda Bolton Weiser of Caris & Co. provides perspective on whether Proctor & Gamble is undervalued, and Charlie Bobrinskoy of Ariel Investments discusses his firm's heavy focus on JPMorgan.

Multiple Expansion

Finerman thinks Ackman's investment could be a bet that the P/E multiple is about to increase with the Street willing to pay more for a consumer staples company in a weak economy. According to this thesis, P&G would attract more capital as investors seek out stocks that offer yield and relative safety.

“However, if that’s the case, to me, that’s a hard sell,” says Finerman.

Caris analyst Linda Bolton Weiser says much the same. “I don’t think the stock is undervalued – I have a $62 price target on it. “P&G is trading at a modest discount to Colgate but largely it’s an expensive stock.”

Trader Guy Adami, managing director of stockMONSTER.com, feels a little differently. He says P&G is trading at a 16 multiple when smaller rival Church & Dwight is at a 22 multiple. "And CHD made an all-time high today. And on paper it's a better name."

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New CEO

Weiser thinks Ackman may have another agenda. She believes he’s looking to oust CEO Bob McDonald. “There’s quite a bit of Wall Street dissatisfaction with McDonald,” she reminds.

However, if that’s Ackman’s goal, she doesn’t think the stock rallies in the near-term. “There’s no obvious replacement and Procter & Gamble has a history of promoting from within,” she says.

Trader Stephen Weiss, managing partner at Short Hills Capital, says whatever his agenda is, stay away. Weiss is skeptical simply because P&G is such an enormous company. At the time of writing the market cap was $175 billion. Even if this is his largest stake, Weiss says he probably won’t wield enough influence to implement any change that the board otherwise wouldn’t want to implement.

“Icahn couldn’t influence Clorox,” he reminds. “Ackman won’t be able to influence P&G.”

And he reminds Ackman’s track record isn't stellar. “He’s also a large shareholder of JCPenney,” reminds Weiss. “How’s that been going?”

What do you think? We want to know!

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Posted by CNBC's Lee Brodie

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Trader disclosure: On July 12, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long GOOG; Karen Finerman is long NFLX; Karen Finerman is long M; Karen Finerman is long CMI; Karen Finerman is long CMI CALLS; Karen Finerman is short SPY; Karen Finerman is short IWM; Karen Finerman is short MDY; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long PNC; Joe Terranova is long USB; Joe Terranova is long TCBI; Joe Terranova is long SBUX; Joe Terranova is long MNST; Joe Terranova is long NKE; Joe Terranova is long WFM; Joe Terranova is long MAR; Joe Terranova is long AAPL; Joe Terranova is long EMC; Joe Terranova is long NXPI; Stephen Weiss is long CAT; Stephen Weiss is long VZ; Stephen Weiss is long TOT; Stephen Weiss is long BCE; Stephen Weiss is long DVN; Stephen Weiss is short X; Stephen Weiss is short JCP; Stephen Weiss is short PCAR; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long NUE; Guy Adami is long AGU; Guy Adami is long BTU; Guy Adami is long MSFT; Guy’s Wife works at Merck

For Charlie Bobrinskoy
Charlie Bobrinskoy is funds long MS
Charlie Bobrinskoy is funds long GS
Charlie Bobrinskoy is funds long KKR
Charlie Bobrinskoy is funds long JPM
Charlie Bobrinskoy is funds long BAC

For Jim Bower
Jim Bower is long Corn
Jim Bower is long NATGAS

For Linda Bolton Weiser
Nothing to Disclose




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  • Finerman is president of Metropolitan Capital Advisors, Inc., a company she co-founded.

  • Founder of EmergingMoney.com

  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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