Tepper's Appaloosa Boosts CVR Energy (CVI) Position ~ market folly

Tuesday, June 7, 2011

Tepper's Appaloosa Boosts CVR Energy (CVI) Position

David Tepper's hedge fund Appaloosa Management recently disclosed an updated position in CVR Energy (CVI). Due to a 13G filed with the SEC, Appaloosa now shows a 8.26% ownership stake in CVI with 7,141,434 shares. This latest disclosure reflects trading as of May 23rd, 2011.

This marks an increase in their position size to the tune of almost 360% as they owned only 1,556,374 shares at the end of the first quarter. Interestingly enough, a selling stockholder affiliated with Kelso & Company LP shed 7,988,179 shares of CVI to Goldman Sachs on May 23rd.

Spin-Out of Fertilizer Business

The company had a secondary offering in February and numerous hedge funds were involved. Dan Loeb's Third Point, in particular, bought CVI under the spin-out thesis.

CVR Energy filed an IPO for its fertilizer business and will pursue an MLP structure for this offering. Hedge funds invested in the stock believe this new offering will garner a high valuation due to high demand for yield in the current low interest rate environment. You can see the full rationale for buying CVR Energy here.

Per Google Finance, CVR Energy is "an independent petroleum refiner and marketer of transportation fuels. In addition, the Company owns all of the interests (other than the managing general partner interest and associated incentive distribution rights (the IDRs)) in CVR Partners, LP (the Partnership), a limited partnership which produces nitrogen fertilizers in the form of ammonia, and a solution of urea and ammonium nitrate in water used as a fertilizer (UAN)."

To see the rest of David Tepper's investments, head to the brand new issue of our Hedge Fund Wisdom newsletter.

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