CVI - CVR Partners: The Chances Of A Near-Term Sale Are Increasing

2024-05-12 08:32:45 ET

Summary

• CVR Partners is an undervalued stock with significant opportunity due to its unique competitive advantages and lack of professional analyst coverage.
• CVRP's competitive advantages include its proximity to the US corn belt, production of low-carbon ammonia, use of pet coke as feedstock, and focus on nitrogen fertilizer for agricultural applications.
• The North American fertilizer market has high-demand and limited supply, creating a potential premium for existing plants like CVRP. A sale of CVRP is highly likely, offering significant upside potential.

The Opportunity

In a market that seems to be chasing the next big new shiny object, sometimes it makes sense to look in more overlooked corners that may be hiding significant opportunity. Yes, AI and Ozempic have huge potential, but these facts are well known. Where does the Alpha come from? What edge do you have overtrained professionals and computer algorithms?

When it comes to CVR Partners ( UAN ), the answer is clear. This stock is very thinly traded, has a less than $900m market cap, is a variable-distribution MLP, is in the extremely un-sexy fertilizer business, and is 37% owned by CVR Energy ( CVI ), controlled by the oft-maligned Carl Icahn. With no professional analyst coverage, who is actually going to buy this stock? Huge swaths of larger investors or funds with mandates are excluded from this opportunity, leaving it still on the table for retail investors who can keep an eye on developments as they come. This helps to explain the mispricing that I will identify and why the market has not been efficient to this point....

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