From the WSJ Archives

Texas Pacific Land Trust Offers A Get-Rich-Slow Opportunity

Oldy but goody here from 1998.  The modern owner has to wonder if Bregman’s quote around a “creeping buyout” will hold true from here.

“People are going to become less interested in ‘concept’ stocks that sell at hope times greed times infinity,” says Mr. Shaefer, who is also editor of the Investor’s Edge newsletter, which has pushed Texas Pacific. Instead, investors will “be looking for real underlying asset value in the companies they own.”

Mr. Shaefer says his fund bought an undisclosed stake in Texas Pacific in January 1997 at $27.63 a share, and he doesn’t plan to sell until the stock reaches at least $80. By his calculations, the underlying assets are worth about $100 a share right now.

At its current rate, the trust is buying back stock more quickly than it’s selling land. Between 1980 and 1995, the trust reduced its number of outstanding shares by 34% but reduced its land inventory only 8%, from 1.2 million acres to 1.1 million acres.

Steven Bregman, president of Horizon Asset Management in New York, has researched Texas Pacific for his firm’s Contrarian Research Report and believes the stock is worth buying. “It’s cheap,” he says. “As long as you want to hold it for a decade, you put it away and forget about it and get rich slowly.”

The buybacks, says Mr. Bregman, are “like a creeping buyout. It’s a snowball effect.”

 

 

4 thoughts on “From the WSJ Archives

  1. Tpl is a compounding machine, with a low cost to operate the business. Historically that had been the case for a very long time. The current oil boom has made it a different kind of stock, its no longer a slow grower due to the surging EPS. Short run anything can happen with the price, but long run it will continue to be reducing shares and increasing in price. Bregman is still right in the long run.

    You might enjoy this article talking about how shares are being retired faster than the land is being sold. Nothing new here….except the article is from 1923!

    https://books.google.com/books?id=fv0gAQAAMAAJ&pg=PA996&lpg=PA996&dq=texas+pacific+land+trust,+1900&source=bl&ots=7UYQnkIB4b&sig=E9fNyS5olmMlcQEXuzDWPFrbO0U&hl=en&sa=X&ved=2ahUKEwj6xqvWq_beAhUrCTQIHU-TCWwQ6AEwEXoECAQQAQ#v=onepage&q=texas%20pacific%20land%20trust%2C%201900&f=false

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      • What is interesting is a share in 1923 (it has split many times since then) was worth $300, and represented 91 acres of land. Today it takes 8.81 shares to own the equivalent of one acre of land. Or $4,991 at today’s stock price. Shows the impact of inflation on a really long time horizon, and of course a dramatic reduction in the number of outstanding shares.

        I find it fascinating that TPL was recognized for its unusual compounding qualities back in 1923. But it also speaks to a larger concern, in the world of today where some shares are just owned for seconds, and the average hold time of the entire market is under 6 months…..our attention spans are short, the big money will be made by owning for decades. And not just two or three decades, but 10 decades. The typical buyer is probably not thinking this is a 100 year hold investment.

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  2. I read the rest of the magazine after the TPL report. I love the focus on investor psychology that was apparent then. The magazine took a fiduciary approach as opposed to modern mags which are mostly puff pieces coordinated by PR teams.

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