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Why Carl Icahn Keeps Buying The Hain Celestial Group Stocks

September 22, 2010 | About:
The Hain Celestial Group, Inc. (HAIN) manufacture, market, distribute and sell natural and organic products under brand names which are sold as “better-for-you” products, providing consumers with the opportunity to lead “A Healthy Way of LifeTM.” It is a leader in many natural and organic food categories, with such food brands as Earth’s Best® , Celestial Seasonings®, Terra®, Garden of Eatin’®, among many other. The company’s cleaning products are marketed under the Martha Stewart CleanTM brand.

The company has enjoyed healthy growth during the past decade. On per share basis, revenue has grown at a 10.2% per year rate, even taking into account the decline in the most recent year.



Free cash flow of the company has reached twice during the past 10 years about $60 million, but not always a sure thing:



Another way to look at it: the company has a market cap of $1.05 billion; its shares were traded at around $24.59 with a P/E ratio of 22.8 and P/S ratio of 1.1. Even assuming the recession incurred slowdown does not count, by all means, I would not call the stock a screaming bargain at this price. It is not terribly expensive, but no bargain.

But I am not Carl Icahn either. Since we reported that Icahn first bought into the company during the second quarter of 2010, we have registered and made available to our premium members information on the following transactions in which Icahn continue to buy the stock:



Insider

Position

Date

Trades

Shares

Trade Price ($)

Change (%)

ICAHN CARL C 10% Owner 2010-09-20 Buy 59502 $23.45 4.86
ICAHN CARL C 10% Owner 2010-09-20 Buy 59502 $23.45 4.86
ICAHN CARL C 10% Owner 2010-09-16 Buy 115100 $23.68 3.84
ICAHN CARL C 10% Owner 2010-09-16 Buy 115100 $23.68 3.84
ICAHN CARL C 10% Owner 2010-09-13 Buy 149600 $23.83 3.19
ICAHN CARL C 10% Owner 2010-09-13 Buy 149600 $23.83 3.19
ICAHN CARL C 10% Owner 2010-09-08 Buy 61200 $24.51 0.33
ICAHN CARL C 10% Owner 2010-09-08 Buy 61200 $24.51 0.33
ICAHN CARL C 10% Owner 2010-09-01 Buy 264500 $22.61 8.76
ICAHN CARL C 10% Owner 2010-09-01 Buy 264500 $22.61 8.76


After the last transaction on September 20, Icahn owns total of 3.5 million shares of the 42.82 million shares outstanding, or about 8.29%.

Icahn is known as an “activist investor” and he typically will not shy away from a fight to get his way in corporate boardroom. In this case, however, it appears that Hain Celestial the company and Icahn are at good terms. On July 16, 2010, the company released a press release and stated that it would put two of Icahn’s nominees on the company’s board.

Hain Celestial’s action shows that not every boardroom negotiation has to be ugly. Constructive disagreement does prevail sometimes.

What I am not sure though, is that the sequential purchase of the stocks mutually agreed upon between the company and Icahn. If Icahn is happy that the company took his nominees into the board, why he is buying more shares?

Maybe he sees compelling value into the stock? Maybe he has other tricks to release the value of the stock? We will see.

When an active investor accumulates more shares than 5% of a target company, he or she needs to report on the fact and any consecutive trades in a matter of days. GuruFocus provides these kind of real time information and insights of Investment Gurus such as Warren Buffett and Carl Icahn for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.

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