David Tepper’s Appaloosa Bets Big on CVR Energy $CVI

David Tepper’s Appaloosa disclosed a 8.26% stake in CVR Energy (CVI). Tepper had 1.5 Million shares of CVI at the end of March, so he added more than 5.6 Million shares as the stock dipped below $20. Yesterday we covered Dan Loeb’s May performance and top holdings and revealed that CVR Energy is Loeb’s fifth largest position.

APPALOOSA MANAGEMENT LP

Dan Loeb’s Third Point had 7.3 Million shares of CVI at the end of March. Eric Mindich’s Eton Park, Ken Griffin’s Citadel, and Douglas Hirsch’s Seneca Capital are among the hedge funds with CVI positions. In our article titled “Three SpinOut Ideas From Dan Loeb’s Third Point“, we presented Dan Loeb’s reasoning for making such a huge bet on CVI as follows:

CVR Energy has two assets: an oil refinery and a nitrogen fertilizer plant, both located in Coffeyville, Kansas. Each of these assets is benefiting from huge structural tailwinds, and the Company is pursuing a spin‐out of the fertilizer business that will, consistent with the theme described above, highlight the value of these assets. We originally purchased CVR in November 2010 on the belief that the Company would be an ideal spin‐out candidate, added to the position in a February secondary offering, and subsequently have purchased additional shares in the market.

CVR filed an S‐1 for the IPO of its fertilizer business in late March. Based on comparable valuations, CVR’s geographically advantaged assets, and the strong outlook for nitrogen fertilizer, we believe the Company will receive a robust valuation for these assets at the time of the IPO. Additionally, CVR is pursuing an MLP structure for this offering, which we believe will result in the fertilizer plant trading at a very high valuation due to investors’ desire for yield in today’s low interest rate environment.

The outlook for CVR’s refining business is likewise strong. The facility recently underwent an extensive upgrading process and is ideally located to take advantage of the oil supply/demand imbalance in the Cushing market. In short, increased supply of oil is flowing into Cushing, and there is presently inadequate take‐away capacity in this market. The result has been that WTI oil prices are at a large discount to oil delivered at other locations, creating the prospect of windfall profits for refineries in this region, as the competition in other regions must source higher‐cost oil. We think that this imbalance should persist for at least the next twelve‐to‐eighteen months (and quite possibly much longer). As a result, we are very constructive on mid‐continent refineries. Further, netting the value of the fertilizer spin, we believe we are creating the CVR refinery operation at a 50% discount to the mid‐continent comparables.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!