What Makes Delek US Holdings (DK) an Attractive Investment?
Investment management company Maran Capital Management recently released its first-quarter 2023 investor letter. A copy of the same can be downloaded here. Maran Partners Fund returned +5.2%, net of all fees and expenses in the first quarter. The fund compounded approximately 12% per year (net) over the last five years. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Maran Capital highlighted stocks like Delek US Holdings, Inc. (NYSE:DK) in the first quarter 2023 investor letter. Headquartered in Brentwood, Tennessee, Delek US Holdings, Inc. (NYSE:DK) engages in downstream energy business. On May 4, 2023, Delek US Holdings, Inc. (NYSE:DK) stock closed at $19.62 per share. One-month return of Delek US Holdings, Inc. (NYSE:DK) was -16.23%, and its shares lost 29.42% of their value over the last 52 weeks. Delek US Holdings, Inc. (NYSE:DK) has a market capitalization of $1.314 billion.
Maran Capital made the following comment about Delek US Holdings, Inc. (NYSE:DK) in its Q1 2023 investor letter:
"Delek US Holdings, Inc. (NYSE:DK) is a holding company that owns four refineries, about 250 gas stations, and 34.3 million shares of publicly traded Delek Logistics Partners, LP (NYSE: DKL), its captive master limited partnership, which owns a series of oil pipelines and infrastructure assets.
Delek has 67 million shares outstanding and recently traded at $21.50 per share, putting its market cap at just over $1.4 billion. I estimate it has around $300 million in net debt (thought the balance sheet is opaque because DK consolidates DKL’s financials), so its enterprise value is $1.75 billion. What are investors getting for $1.75 billion? Well, for starters, DK’s position in DKL, which recently traded at $48/sh, is worth $1.65 billion. So, the adjusted enterprise value (or “stub value” in special situation parlance), taking into account net debt as well Delek’s DKL position, is approximately $100 million.
The gas stations are likely worth $300-$400 million, based on recent comparable transactions. And I think the refineries could be worth another $1.5 to 2 billion or more ($22- 30/sh), triangulating from a number of valuation approaches. All in, DK appears to be a fifty-cent dollar, with essentially all of its market cap covered by its ownership position in DKL, little debt at the parent company, and significant free cash flow..." (Please click here to read full text)
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Delek US Holdings, Inc. (NYSE:DK) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held Delek US Holdings, Inc. (NYSE:DK) at the end of the fourth quarter which was 27 in the previous quarter.
We discussed Delek US Holdings, Inc. (NYSE:DK) in another article and shared the list of most undervalued small-cap stocks to buy according to hedge funds. In addition, please check out our hedge fund investor letters Q1 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
