This Happens All the Time

TPL closed at $871.99 on 10/3/18.  This marked an all time closing high price for the Trust.  As I type, the last trade was $729.57 which gives us a -16.3% move down from peak to current.   In that time, the S&P500 is down 7.4% on a price return basis whilst CME crude futures are down 14%.  Said simply, TPL is underperforming large caps but is just about pacing oil.

In TPL’s price zip code, a 16.3% move down equates into some big dollar swings that might hurt more psychologically than a similar move in a stock that goes from $10 to $8.37.  It’s not every day that you see a $140 down move in price.  Ouch:

price chart normal

When you observe the down move on a logarithmic scale, the current move looks reasonable in the context of of past moves.  A 10% move now looks the same as a 10% move then.  The Trust has seen many of them.  In both directions.

price chart log

So, in summary, low liquidity and a +156% total return over the past two years will give you a pull back like this.  To quote Tom Jones, “It’s not unusual”.

Source: Bloomberg

2 thoughts on “This Happens All the Time

  1. I’m not going to lose sleep over these last few rocky days for TPL and have full faith in a quick recovery, but it does beg the question of whose selling and why at this time so close to earnings announcement. This feels like one of the biggest “corrections” I’ve seen with TPL in my many years of ownership, but thanks for showing that there have been some “corrections” in the past, not unexpected. Besides the fundamentals being so strong to begin with, I’ve always assumed that there is a natural safety net built in with TPL to prevent a huge free fall in the form of Horizon Kinetics (who still proclaim to be bullish about continuing to add to their mammoth position) and the trust itself (taking advantage of opportunities to buyback shares). Given the likelihood that there is some kind of blackout period imposed on the trust (although not conclusive in the data you’ve gathered), I hope we will see it come out of the gates strong in November with large scale buybacks. I’ll still go out on a limb and predict $900-1000 shares by end of year, assuming a strong earnings report we can expect to see next week.

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