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.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!