Carl Icahn, the billionaire investor, has increased his stake significantly in CVR Partners. This US fertilizer manufacturer is based on CVR Partners. He purchased shares nearly every day of trading since November 5, when President Obama was elected.
Icahn’s total stock holdings are now about 3.9 millions, according to documents filed with the Securities and Exchange Commission.
He owns 37% of the shares in his company.
Icahn is confident in natural gas prices under Donald Trump.
CVR Partners, which trades as UAN on the stock exchange, produces ammonia based fertilizers in plants located in Kansas and Illinois.
The company’s profitability is highly dependent on changes in the gas price, especially at its Illinois plant.
Trump’s Energy Agenda could reduce costs
The “energy dominance agenda” of President-elect Trump, including expanding oil and natural gas drilling, will increase supply and possibly lower the cost of gas.
Icahn is bullish because of the reduced input costs that could be beneficial to ammonia-based fertiliser producers such as CVR Partners.
CVR Partners shares have increased by about 7% in the past year, outpacing S&P 500 which gained only 4%.
CVR Partners, a relatively small energy company with a market cap of $750m, is not covered by Wall Street analysts.
Stocks are also favored by other factors
CVR Partners’ valuation metrics reveal a compelling story.
A P/E of 14,17, and a Price-to-Book ratio of 2,58 suggest that the company is fairly priced. This is especially true when you consider its strong free cash flow yield.
Icahn could have identified an opportunity to invest by identifying the current P/S of 1.44, which is below industry standards.
CVR Partners’ dividend yield is 9.4% and this makes it attractive to income investors.
CVR Partners’ profitability has not changed despite a revenue decline of 29.88% in the last year. This shows its resilience.
Operating income margin is 15.69%.
CVR Partners, however, has a high ratio of debt to equity (1.92), which indicates that the company may face financial challenges.
Icahn has made consistent and substantial purchases, indicating that he believes the natural gas market will be favorable under Trump.
GE Vernova’s shares are also on the rise
Other companies with energy links are optimistic in light of the recent election.
GE Vernova’s stock has risen by approximately 5% in the last five months.
Analysts have increased their target prices for GE Vernova, including Christopher Dendrinos of RBC who raised his price to $376.
Dendrinos attributed the optimism Dendrinos to the tight supply and demand dynamics on the turbine market which allows GE Vernova a raise in prices.
The company is well-positioned for Trump’s new energy policy, with 74% analysts recommending the stock as a buy. This compares to the average S&P 500 rating of 55%.
This post Why has Carl Icahn been buying up this stock of fertilizer since Election Day? This post may be updated as new information is revealed.
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