Billionaire Carl Icahn warns that red-hot inflation has no cure. But he likes these 2 “cheap and viable” stock picks for protection

'The worst is yet to come': Billionaire Carl Icahn warns that red-hot inflation has no cure.  But he likes these 2

‘The worst is yet to come’: Billionaire Carl Icahn warns that red-hot inflation has no cure. But he likes these 2 “cheap and viable” stock picks for protection

A loose monetary policy may seem nice at first, but it has consequences.

While asset prices skyrocketed in 2020 and 2021, they retreated significantly in 2022. Meanwhile, inflation remains near its 40-year high and the Fed must raise interest rates aggressively to bring prices under control.

“We printed too much money and just thought the party would never end. And the party is over,” says billionaire investor Carl Icahn at MarketWatch’s Best New Ideas in Money Festival via a remote feed.

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

Looking ahead, his view is not exactly optimistic.

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“The worst is yet to come,” says Icahn, warning that “inflation is a terrible thing” and “you can’t cure it.”

That said, he doesn’t recommend giving up stocks completely.

“I think a lot of things are cheap and they’re going to get cheaper,” he says.

Given Icahn’s hugely successful career as an investor, people want to know where he sees opportunities right now.

“I’m just curious what stocks look cheap and viable right now,” an audience member asked him during the Q&A session.

Icahn gave two names.

CVR Energy (CVI)

Energy was by far the best performing sector on the S&P 500 in 2021, with a total return of 53% versus the index’s 27% return. And that momentum has continued into 2022.

So far, the Energy Select Sector SPDR Fund (XLE) is up a solid 62%, in stark contrast to the broad market’s double-digit decline.

Icahn’s energy of choice is CVR Energy (CVI), which is primarily active in the refinery business. He says the stock is “pretty cheap, even though it’s gone up a lot.”

According to the latest 13F filing, Icahn owned 71.2 million shares of CVR Energy at the end of September, worth about $2.06 billion at the time.

The position has served the billionaire investor quite well as shares of CVR Energy are up 126% year to date.

As you would expect from this kind of price performance, the company is running on all cylinders.

Read more: You’re probably overpaying when you shop online – get this free tool before Black Friday

In the third quarter of 2022, CVR Energy generated $2.7 billion in net sales, up from $1.9 billion in the same period a year ago.

The company also became more lucrative as its refining margin per total throughput improved to $16.56 in Q3, compared to $15.03 in the same period last year.

The company recently announced a special dividend of $1.00 per share, in addition to its regular quarterly cash dividend of 40 cents per share.

Ichan also likes the company because “you can’t build another refinery in this country.”

CVR Partners L.P. (UAN)

CVR Partners is a master limited partnership established by CVR Energy to own, operate and grow its nitrogen fertilizer business.

Although the two entities are related — subsidiaries of CVR Energy own 37% of CVR Partners’ joint units — CVR Partners is also publicly traded. The ticker symbol is UAN.

“[The] Fertilizer trading is a great business for me these days,” says Icahn.

CVR Partners’ production facilities mainly produce fertilizers based on ammonia and urea ammonium nitrate (UAN), which are in high demand.

In the third quarter, the partnership’s average realized gate price for UAN shot up 42% year over year to $433 per ton. For ammonia, the average realized gate price increased 65% year over year to $837 per ton.

Unsurprisingly, CVR Partners has delivered another stellar performance in this ugly market as its stock is up 38% year-to-date.

It’s easy to see why the company appeals to Icahn.

“You need fertilizer if you want to eat,” he says.

Indeed, if you want the ultimate protection against all the uncertainties facing the world today, farming deserves a serious look, even if you know nothing about farming.

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This article provides information only and should not be taken as advice. It comes without any kind of warranty.

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