CVR Energy (CVI)
Energy was by far the S&P 500’s best-performing sector in 2021, returning a total of 53% vs the index’s 27% return. And that momentum has carried into 2022.
Year to date, the Energy Select Sector SPDR Fund (XLE) is up a solid 62%, in stark contrast to the broad market’s double-digit decline.
Icahn’s pick in the energy space is CVR Energy (CVI), which is mainly in the refinery business. He says that the stock “is quite cheap, even though it’s come up a lot.”
CVR Energy shares have surged 118% year to date.
As you’d expect from this kind of share price performance, the company is firing on all cylinders.
In Q3 of 2022, CVR Energy brought in $2.7 billion of net sales, up from $1.9 billion in the year-ago period.
The business got more lucrative, too, as the refining margin per total throughput barrel improved to $16.56 in Q3, compared to $15.03 in the same period last year.
The company recently declared a special dividend of $1.00 per share — on top of its regular quarterly cash dividend of 40 cents per share.
Ichan also likes the business because “you can't build another refinery in this country.”
CVR Partners LP (UAN)
CVR Partners is a master limited partnership created by CVR Energy to own, operate, and grow its nitrogen fertilizer business.
While the two entities are related — CVR Energy subsidiaries own 37% of the common units of CVR Partners — CVR Partners is also publicly traded. Its ticker symbol is UAN.
“[The] fertilizer business, to me, is a great business today,” Icahn says.
CVR Partners’ manufacturing facilities primarily produce ammonia and urea ammonium nitrate (UAN) fertilizers, and those things are in strong demand.
In Q3, the partnership’s average realized gate price for UAN shot up 42% year over year to $433 per ton. For ammonia, the average realized gate price rose 65% year over year to $837 per ton.
Unsurprisingly, CVR Partners has been another stellar performer in this ugly market as the stock is up 38% year to date.
It’s easy to see why the business is appealing to Icahn.
“You need fertilizer if you want to eat,” he says.
Indeed, if you want the ultimate hedge against all the uncertainties the world is facing today, agriculture deserves a serious look, even if you know nothing about farming.
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