“I Buy It For Myself Everyday”

Murray Stahl Lunch Roundtable 12/13/2018


All quotes are quite loose. Not verbatim.

-Baseline is that Murray thinks the stock market is still very rich.  Valuations high and Murray isn’t bullish on earnings growing into valuations going because ROE is already so high.  Tarrifs hurting and will continue to hurt.

-Murray thinks there is collectively way too much debt in the system.  Public plus private = $72T (I love the over personally).  100bp increase in rates = $717B in increased carry cost = 3.5% of GDP.

-Real rates are still negative as the float of the currency increases 4.4% yearly.  Add taxes on that.  Murray gets to a -2% real yield on the 10yr Tsy.

-“One way or another the bond market is going to get a positive real rate of return.  Could be deflation.  Could be higher rates.  Anyway it happens, equity valuations are going to take it on the chin as bonds become a viable alternative and discount rates increase.”

-“Texas Pacific Land is my favorite stock”  (12:35)

-TPL comments go from 12:30 to 27:30

-“Land has some economic value.  Assuming inflation is going to be 4%, the land is going to appreciate by 4%.  We know that about 1% of the stock gets taken out each year.  The trust also pays a small dividend.   My base return is a little over 5%.”

-“On top of base I get: 1) at the money call on inflation, 2) the optionality of technology improvements, 3) long term optionality on land and the oil below it, 4) long term option of benefitting from overseas political regime change.

-“In 2014 TPL was $100 and oil was over $100/bbl.  Not oil is $50 and TPL is $500.  There are other variables over the fullness of time that will differentiate TPL from oil.”

-“What a broker charge you for an infinitely long, at the money call option on oil?  That’s embedded in TPL’s price.”

-“Middle eastern monarchies are inherently not stable.”

-“If I find something good, I don’t want to sell it.”  Murray would prefer not to sell TPL in client accounts and mutual funds.

-“The taxes we would have paid on the sale are basically equal to the recent downdraft.”

-“The technology option has paid off.  The increase in oil price option has not paid off”

-“The technology option keeps resetting itself.”

-“Not a lot of things like TPL.  The odds of finding something as good are exceedingly low.  A normal investor is going to find 6 great investments over the time of their career”  (I love the under).  “If you find something good, you should leave it alone”

-Murray is buying for himself daily!   And adds it to new client accounts though not to 30% like other accounts.

-TPL comes back up in Q&A at 1hour 25min mark.  “TPL water business is expanding and will keep expanding.  There is lots of territory that hasn’t been touched yet.  Private equity is building many water purification facilities and they need water.  I’m really excited about water.”

-“USGA survey that recently doubled expectations is based on 2017 data.  Lots of 2018 data out there and the expectations could keep expanding.”

-“TPL is the greatest piece of real estate in the US”.

-“Very little is know for strata below current levels being mined.”

-“Extraction gets cheaper every week and the quality of the oil is very high”

-“I bought some today and unless something happens I will buy some tomorrow.  It’s very cheap.”


Side note:  If you are into crypto you should do yourself a favor and listen to the whole call.





2 thoughts on ““I Buy It For Myself Everyday”

  1. Best comment from Murray in this roundtable is the point about TPL being a $100 stock in 2014 when oil was over $100/bbl and now being valued at $500 despite oil dropping to $50. It really goes to illustrate that TPL is so much more than just a proxy for oil because of all the other variables that can add value: higher production forecasts in the Permian due to improved technology and many DUCs, royalties from natural gas, water sales, dividends/buybacks, inflation adding to the value of the land, E&S, hedge against political instability around the world, and on and on.

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