We can never quite be sure what expectations the stock market is pricing in.

For instance, refiner margins clearly (to us at least) had nowhere to go but up from the summer lows, and we’ve certainly enjoyed the 15% return from Marathon Petroleum (NYSE: MPC) since it rejoined the Growth Portfolio two months ago.

But what to make of the doubling in the share price of CVR Energy (NYSE: CVI) since Election Day, and its 50% rise in just the past month?

Investors are obviously counting relief from odious ethanol blending quota regulations, all the more so after CVR Energy’s majority owner Carl Icahn was named Donald Trump’s deregulation advisor on Dec. 21, formalizing Icahn’s unofficial role during his friend’s presidential campaign.

But markets are notoriously bad at pricing in dramatic swings of fortune quickly, and likely still haven’t fully done so in this instance. The cost of complying with the Environmental Protection Agency’s Renewable Identification Numbers (RINs) ethanol quota tracking system has recently amounted to 100% of EBITDA ( cash earnings ex-items) for CVR Energy’s refining affiliate.

The bet here is that the Icahn protégé selected by Trump to lead the EPA can stop this bleeding relatively quickly. The needed changes wouldn’t require lower ethanol consumption, fall broadly within the EPA’s rule-making authority and would provide a huge shot in the arm for independent refiners in the U.S. heartland at the expense mostly of the oil majors and other major gasoline retailers. The gains from this overdue rules fix would be dramatic and disproportionate for Icahn and certain other well-connected Trump supporters, at the expense  of larger, less focused players – pretty much the ideal political setup.  

Refining margins have firmed over the past month, yet remain near the bottom of historical range. And the higher oil prices we expect next year should allow U.S. refiners to gain more market share from their less efficient competitors in Latin America.

Despite CVI shares’ recent gains, it seems unlikely that short sellers have managed to cover a major chunk of short interest that amounted to 36% of the float a month ago. They remain vulnerable to a squeeze in the coming weeks.

More importantly from our perspective, despite the huge RIN costs and low refining margins prevalent during the first nine months of the year, CVR and its affiliates still managed to deliver enough consolidated cash flow to more than fully cover the stock’s current 7.9% annualized yield. The affiliated refining and fertilizer MLPs will need to resume making distributions to their partners at some point. But we have an inkling that if they find the cash to do so it won’t be at the expense of Icahn and the other  CVR shareholders.

The yield and the operating cash flow to support it will be an area of focus for us in the coming year, as we look for investments that can continue to generate returns even if the rally in energy prices stalls and reverses.

Today we’re adding CVR Energy and two other reliable and generous yielders to our portfolios. CVI joins the Aggressive Portfolio with a buy limit of $30.

We’re also recommending the Tesoro Logistics (NYSE: TLLP) and Archrock Partners (NASDAQ: APLP) MLPs. Gatherer, processor and refinery logistics pipeline operator TLLP yields 6.9% despite rallying 10% over the past month, and joins the Growth Portfolio with a Buy limit of $60. Compression services provider APLP is yielding 7.1%, and is an Aggressive Portfolio buy below $19. We will profile these selections in the coming issues.