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A well-known American investor would bet on these 2 stocks that look incredibly cheap in the rest of 2022

Jamie Cameron
23. 10. 2022
4 min read

With less than two and a half months to go until the end of the year, it is already obvious that this will be one of the toughest years on record for investors. The broad S&P 500 index has posted its worst first-half return since Richard Nixon was president. Here are 2 stocks that investment legend Carl Icahn is currently betting on.

Carl Icahn is the founder and majority shareholder of Icahn Enterprises

Yet, while many investors suffered painful losses in 2022 - the S&P 500 had its worst first half since 1970 - Icahn is not one of them. At his company, Icahn Enterprises, net asset value is up about 30% in the first six months of this year.

Looking ahead, his outlook is not optimistic. "The worst is yet to come," Icahn says, warning that "inflation is a terrible thing" and "you can't just get rid of it."

Carl Icahn's investment strategy

Like fellow billionaire Warren Buffett, Icahn subscribes to a value investing strategy. In general, Icahn is interested in investing in stocks that do not fully reflect the full potential of companies. Icahn has stated that he buys a company when "nobody wants it." It is also notable that this strategy requires the investor to view the purchase of shares as an investment in the business.

There is, however, a notable difference between Icahn and Buffett. Although both are value investors at their core, Buffett tends to buy with the intention of holding the stock indefinitely. In contrast, Icahn is willing to sell his shares to lock in profits once the market has determined the true value of the company. Icahn, of course, holds the stock for the long term. But his strategy is not so much to build a diversified portfolio of stocks as it is to make short-term bets on stocks that could quickly increase in value.

Given Icahn's massively successful career as an investor, people want to know where they see opportunity right now. "I'm just curious what stocks look cheap and viable right now," an audience member asked him during a Q&A session at the Best New Ideas Festival. Icahn mentioned these two names.

CVR Energy $CVI+0.4%

Energy was by far the best performing sector of the S&P 500 in 2021, with a total return of 53% versus the index's 27% return. And that momentum has carried over into 2022. Icahn's pick in the energy space is CVR Energy , which operates primarily in refineries. Shares are up a lot this year, he says, even though their value has gone up".

CVI shares have added 76% over the past year

CVR Energy is the largest stake in Icahn Enterprises LP by market value. CVR is not a growth company, but it is profitable and returns its profits to shareholders (primarily Icahn) through dividends. Icahn acquired a majority stake in CVR in 2012.

The company's refineries can process blends of different types of crude oil from heavy sour to light sweet crude. Crude oil for CVR's refineries is delivered through its wholly owned gathering system and pipelines. From its refineries, CVR delivers product via tank trucks directly to customers located in close geographic proximity and to customers at outlet terminals. The Company's customers include retailers, railroads and agricultural cooperatives.

The company recently declared a special dividend of $2.60 per share - in addition to its regular quarterly cash dividend of 40 cents per share. This represents a gross dividend yield of over 6.8%.

CVR Partners LP $UAN+0.0%

CVR Partners is a master limited partnership formed by CVR Energy to own, operate and grow its nitrogen fertilizer business. While the two entities are related - subsidiaries of CVR Energy own 37% of the common units of CVR Partners - CVR Partners is also publicly traded.

UAN shares have appreciated more than 53% over the past year

CVR Partners LP is a manufacturer and supplier of nitrogen fertilizers. Its main products include urea ammonium nitrate (UAN) and ammonia. The company sells ammonia products to industrial and agricultural customers and UAN products to agricultural customers. The primary geographic markets for its fertilizer products are Kansas, Missouri, Nebraska, Iowa, Illinois, Colorado and Texas. Sales of the Company's products are heavily weighted toward UAN. "The fertilizer business is a great business for me today," Icahn says.

If you want maximum protection against all the uncertainties facing the world today, agriculture deserves serious consideration.

DISCLAIMER: All information provided here is for informational purposes only and is in no way an investment recommendation. Always do your own analysis.

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