Bryan Perry’s Top Trade for 2012
Continuing the fertilizer theme is CVR Partners (NYSE:UAN), the nation’s low-cost producer of nitrogen fertilizer. With the secular bull market for food commodities fully intact, I expect UAN to generate accelerating profits and distributions in 2012. Consider this: The primary input for producing nitrogen fertilizer is natural gas. With natural gas prices at near historic lows, and prices for corn fertilizer near all-time highs, profit margins are extremely healthy.
And the numbers don’t lie. UAN went public in April 2011 at $15 per share. From there, it was five times oversubscribed, opened at $16.75, rallied to $27.75 in mid-September, and has since cooled off to its current price of $24. The partnership declared a third-quarter distribution of 57.2 cents, implying a forward dividend yield of 9.82%. The stock trades for less than 12 times forward estimates, has a very low payout ratio of 44 and boasts year-over-year quarterly revenue growth at 66%. Count on continued momentum for this fertilizer stock in the new year, upwards of $35.