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Cash Machine Invests with an "Ichan"

09/23/2019 5:00 am EST

Focus: STRATEGIES

Bryan Perry

Editor, Cash Machine, Premium Income, Quick Income Trader, Instant Income Trader

I like to stay with CEOs who have a hot hand and, of late, one of them is Carl Icahn. So far, Icahn Enterprises LP (IEP) has been a great pick, paying a huge dividend while also generating a total return of +25.6% in just over one year, notes income expert Bryan Perry, editor of Cash Machine.

His holdings within IEP are positioned in several companies that are leveraged to the current economy and one of them, in particular, is undergoing a big change that has my full attention this week as to where to find high yield income coupled with significant capital appreciation potential.

Within the $8.2-plus billion in assets that make up Icahn Enterprises L.P., roughly $2.2 billion is invested in CVR Energy (CVI), a key player in the oil refining business with operations in nitrogen fertilizer.

Refiners are amid a boom with a big spread between the price of crude and the selling price of refined products like gasoline, diesel and jet fuel. The spread is increasing profits dramatically.

Icahn Enterprises L.P. owns 82% of CVR Energy, along with $6.0 billion of other assets. I want to be able to provide a pure play on refining that carries with it a super dividend yield of 6.6%.

For the second quarter of 2019, CVR Energy announced net income of $116 million, or $1.16 per diluted share, on net sales of $1,687 million, compared to net income of $43 million, or 50 cents per diluted share, on net sales of $1,914 million for the second quarter of 2018.

Second-quarter 2019 earnings before interest, taxes, depreciation and amortization (EBITDA) were $273 million, compared to second-quarter 2018 EBITDA of $180 million.

What attracts me back into this name, at this time, is the prospect of the company being sold per its May 21 announcement that it was exploring a transaction. This is what Carl Icahn does best, taking a majority stake, positioning the company for sale and getting a premium for the business.

CEO Dave Lamp has sold the past two companies he oversaw and is poised to deliver another big winner for investors. We sold CVR Energy on July 16 at $53.95 and the stock has retreated back down towards $40. The stock makes a fine re-addition to our Conservative High-Yield portfolio.

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