How CVR Partners Bloomed in 2011
As 2011 comes to a close, it's a great time to look back at what happened to the stocks that interest you. By making sure you know the important things that a company accomplished -- as well as the setbacks it experienced -- you can make a better decision about whether it's a smart investment for your portfolio.
Today, let's take a look at CVR Partners (NYS: UAN) . With crop prices at high levels, companies like CVR that make fertilizer saw their products in high demand. Yet, some fear that high crop prices are only temporary, and if emerging economies like China start to slow down, then overseas demand for food crops will go slack, reversing the long farm boom. Below, I'll take a closer look at the events that moved shares of CVR Partners this year.
Stats on CVR Partners
|Total Return Since IPO||43.4%|
|Market Cap||$1.68 billion|
|Sales, Trailing 12 Months||$255 million|
|Net Income, Trailing 12 Months||$85 million|
|CAPS Rating (out of 5)||*****|
Source: S&P Capital IQ.
Why did CVR Partners do well this year?
CVR Partners emerged onto the scene in the middle of one of the best environments in years for the fertilizer industry. The master limited partnership, in which parent CVR Energy (NYS: CVI) owns a majority interest, went public in April at $16 per share and has traded higher ever since.
Even though it has a short history as an independently traded entity, CVR Partners has gotten off to a fast start. In order to stand up to bigger, better-established competitors like PotashCorp (NYS: POT) , Mosaic (NYS: MOS) , and Terra Nitrogen (NYS: TNH) , CVR Partners plans to spend $36 million next year as part of a huge expansion project for completion in early 2013. The new project will boost expansion by about 400,000 tons per year.
CVR Partners has three key advantages over many of its competitors, though. One is that it's located near the main line of Union Pacific (NYS: UNP) , which allows it to get cheaper transportation for its products. It's also in the middle of the U.S. Corn Belt, which gets it closer to its farming customers. And finally, the company gets most of the feedstock it needs to produce its fertilizer from a refinery owned by CVR Energy right next door. That protects it from exposure to natural gas prices -- which could be a key advantage if those prices start to rise.
All of those advantages have helped give shares a big boost in 2011. And as if that weren't enough, you're also getting a 10% dividend yield right now. That's not guaranteed to last, but as long as the industry stays hot, CVR Partners is well-positioned to profit from it.
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At the time this article was published Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.
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