There is good news for defensive consumer products and high dividend investors: change is likely coming in some form at Procter & Gamble Co. (NYSE: PG).  The market value as of yesterday was a whopping $175 billion after the gain from word that Bill Ackman’s Pershing Square was amassing a large stake in the company.  Now there is word that P&G’s board of directors is considering dismissing CEO Robert A. McDonald. We would caution that the move being priced in may have already gotten ahead of itself and we want to hear from our readers on the matter with a poll.

The share price move of the last 48 hours has been a massive move for a DJIA component.  This is a chance for our readers to play arm-chair activist by taking our ‘activist investor poll’ here. After a 1.7% gain so far on Friday morning (on Friday the 13th nonetheless) we have shares up 1.7% at $64.81 against a 52-week range of $57.56 to $67.95.  Thomson Reuters has a consensus price target of $67.13 but that may not reflect the latest gains as the move so far this week of 6.6%.

Here is the poll, with other data on consumer products giants behind it:
[polldaddy poll=6385563] 

Kimberly-Clark Corporation (NYSE: KMB) and the much lower yielding Colgate-Palmolive Co. (NYSE: CL) have both significantly outperformed P&G’s share performance.  We think a yield-bubble is forming in Kimberly-Clark as its yield dipped under that of P&G.

Another note we cannot ignore is that the giant activist investor Carl Icahn went after The Clorox Company (NYSE: CLX) before trying to sniff out a buyer for it.  That did not work out even if the $73.24 price after a 1.1% gain so far today compares to a 52-week range of $63.06 to $75.44.  Clorox’s market cap is now $9.5 billion, which is actually small compared to $33.2 billion at Kimberly-Clark, $50 billion at Colgate-Palmolive, and what is now over $177 billion at P&G. 

The lesson is simple: if Carl Icahn cannot move the needle at a boring $9.5 billion company, how can Ackman make that much change at P&G?  Anything is possible, but even a 5% stake would require an investment of more than $7.5 billion at this point.  So, while we think the move has been exaggerated we do think that it can continue.  If analysts believe that Ackman and others can really make a difference then that $67 target could easily go to $70… or even higher. 

Again, we are looking for our readership’s help here on how best to help fix P&G.  Taking that poll will help in determining what to do.

JON C. OGG

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