Tag: chart

On Blackouts

tpltblogger7 Comments

Both the WSJ and Bloomberg have run articles this year about the power (or lack thereof) of earnings blackouts.  Both suggest that stock prices can get weak when companies are prevented from purchasing their own stock due to prudence around the possibility (or perception) of trading on insider information.

An astute TPL investor would conclude that buyback blackouts are a big deal for TPL since, well, buybacks are its core competency.

I’m not a statistician, nor do I play one on TV but it does appear to me as if the lack of buybacks is a material driver in month to month price action.  Below is the simple average monthly return of all monthly periods since July 1980.  YTD October 2018 at -8.99% is included as a full month in this analysis.

Note that “blackout” months (my assumption) are highlighted in red and represent 2 of the 4 lowest monthly average returns and 4 of the 6 lowest average monthly returns.  If you consider December a throwaway month (tax planning), the blackout effect gets even stronger.

On the flipside, you really want to own TPL in Feb, May, Aug, and Nov which are the months TPL reports prior quarter earnings.  Reporting is typically very early in the month.  I assume TPL comes out guns blazing after that to do its buying.

monthly average pricing

Source: Bloomberg

Shares repurchases declining

tpltblogger

shares out and change

I realize I’m jumping around.  But if you know TPL, you know that it is a trust that was designed to self liquidate.  The trust generally (not always!) applies marginal free cash flow to the repurchase of shares.

As shown above, the outstanding float of shares has decreased by over 50% since 1992.  On average, the trust repurchases 0.72% of itself every quarter.  This may seem like a large number but you have to consider that the 0.72% average is applied to an ever shrinking base.

As we can see by the trend of the orange line (% shares repurchased/quarter), recent repurchases are lower than average.  Ardent followers of TPL will know that this is due to the shares simply getting more expensive.  And when I say expensive, I mean expensive outright and as a % of top line revenue and net income (more on that another day).