Waitin' and Rememberin'

 

Today was 9/11 and the market was slow because of the anniversary of that tragic event.  Just blocks away from Wall Street, that day will always be remembered by so many.

 

Those not observing the remembrance did little trading as they await word, or confirmation that we will see more QE.  The market was up in light trading. 

 

We did not trade at all today. 

 

Keep an eye tomorrow morning as we will hear the German Constitutional Court rule on the Germany's participation in the Euro Bailout.  They are expected to approve it with some more draconian demands on participants.  If we get a surprise denial of the plan look for a nasty snap back in the market.

 

As we said, we crunched some numbers to find some promising stocks.  Here again for our new readers is our process.  We use a screen set by the Auer Fund.  In a simple summary, the screen is 25% quarter over quarter earnings growth, 20% quarter over quarter sales growth, and a PE ratio of 12 or less.

 

When we screen the market with that criteria we shake out about 113 companies.  Then we use an IBD screen based upon some of their proprietary ratings.(Composite rating over 80 and a Accumulation Rating of A or B.)

 

That gets us down to a list of 29 prospects.  I look at those to see if they have been around for at least 5 years (For historical data).  Then I use Morningstar Data to run the company through my Buffet Evaluation worksheet.

 

We "borrowed" the Buffet Evaluation sheet from AAII (American Association of Individual Investors) to use it as an indicator of 10 year projected growth rates using historical EPS (earnings per share) growth and 10 year sustainable growth.  We combine and average those two figures to give us an anticipated blended 10 year return growth rate.

 

One of the top results on the list is AAPL (Note that AAPL did not make the AUER screen because their PE ration is well above 12).  AAPL is throwing a 10 year return figure of 44.79%.  Of course that could change at any given time.  RIG Transocean was indicating a 22% 10 year growth number before the BP Oil Rig Spill.

 

Of the 11 companies we screened today, we found what can be a new gem.

 

CVR Energy, Inc., together with its subsidiaries, engages in refining and marketing transportation fuels in the United States. The company also produces and markets nitrogen fertilizer products. It operates through two segments, Petroleum and Nitrogen Fertilizer. The Petroleum segment owns and operates a coking medium-sour crude oil refinery in Coffeyville, Kansas; and a crude oil gathering system serving Kansas, Oklahoma, western Missouri, and southwestern Nebraska. This segment also owns a proprietary pipeline system that transports crude oil from Caney and Kansas to its refinery; and supplies products through tanker trucks directly to customers located in close geographic proximity to Coffeyville and Phillipsburg, Kansas, as well as to customers at throughput terminals on Magellan Midstream Partners, L.P. and NuStar Energy, LP's refined products distribution systems. Its refinery products include gasoline, diesel fuel, pet coke, propane, butane, slurry, sulfur, and gas oil. This segment serves refiners, convenience store companies, railroads, and farm cooperatives. The Nitrogen Fertilizer segment operates a nitrogen fertilizer plant in North America that utilizes a pet coke gasification process to produce nitrogen fertilizer. It markets ammonia products to industrial and agricultural customers; and UAN, a solution of urea and ammonium nitrate used as a fertilizer to agricultural customers. This segment markets its products in Kansas, Missouri, Nebraska, Iowa, Illinois, Colorado, and Texas. The company is headquartered in Sugar Land, Texas. As of May 18, 2012, CVR Energy, Inc. operates as a subsidiary of Icahn Enterprises Holdings L.P.

 

Fundamentally the company is sound and its prospects look very good.  It's current price of 34.04 includes about 8 bucks a share cash.  The ROE is very healthy at 27.  It has had a nice run up of late because of Carl Icahn increasing his position in the company.  It's forward looking PE is 9.87 and Carl is a successful bottom feeder and its not unusual for him ot pick up companies with a singe digit PE and get the right board in place to double or more.  Even if he can get the 9.87 to the S&P average of about 14 you would be looking at a 48 dollar stock.

 

Our run through the Buffet Evaluation sheet indicates this company can return 37.87% in annual returns.  We will be looking at adding this to our portfolio.  CAUTION, with the big buy by Icahn, and the low multiple, it could be an indication he won't find anyone to flop this to.  We feel comfortable he will by this time next year.

 

Not bad for someone who was not going to do a blog tonight!