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August 16, 2006

Icahn Ups His Stake In Time Warner

The Wall Street Journal is a few days late in reporting that Carl Icahn has upped his stake in Time Warner. When this news first broke on Monday, I wrote the following brief comment for StreetInsight.com:

The facts that Time Warner (TWX) is giving back most of its post-earnings pop and the lack of positive reaction to the news that Carl Icahn increased his stake might indicate that bullish sentiment is getting completely washed out. I know the crappy action over the past year in the stock would tell us that there has been no bullish sentiment, but there are still plenty of models that assume the shares should be trading at least in the low $20s.

It appears investors may finally be accepting that the shares are correctly valued based on trading multiples for key peers like Comcast (CMCSA/CMCSK) and Viacom (VIA/VIA-B). Consequently, the shares might finally be poised to move up toward a more realistic target of $18-$20.

Today, I commented further with a slgihtly more bullish tone towards TWX:

The Wall Street Journal is finally getting around to mentioning Carl Icahn's increased stake in Time Warner (TWX). Assuming the reporting in the article is accurate, the key quote is:

"Mr. Icahn may wait until the end of the year to see if these measures (AOL's new strategy and cable spin-off) improve the stock price before deciding whether to pursue another takeover attempt, according to a person familiar with the matter."

I still think upside is far less than bullish investors believe but the potential for renewed interest by Icahn and the continued poor action in the shares probably have set up a low-risk entry point.

I haven't pulled the trigger yet and may not but I am thinking aobut it for the first time in a very long time.

Posted by Steve Birenberg at August 16, 2006 09:32 AM in TWX