$455 as I write this.  Started the year at $444.  Does $TPL stay positive on the year?  YOY EPS will come close to 2.5x-ing but whatever.

Update 12/21/18:  With today’s close at $432 the Trust is offically under water on the year.  Recent trading patterns don’t have me optimistic about where the price will go during the last week of the year.  Guess we’ll get ’em in 2019.

I remain a buyer.  I’m spending more than I budgeted to pick up small blocks down here.  My kids will thank me.

tpl 2018 px action

Source:  Bloomberg

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.”



Valuation Checkup

Trailing 12mo EPS stands at $21.79 as of 9/30/18.

12mo trailing eps

Since the quarter printed, we’ve seen the Trailing 12mo Earnings multiple contract from 39.6x to 26.3x.

26.3x is below the long term mean of 28.8x but comfortably inside one standard deviation from the mean (17.4x).

px and pe

It appears that TPL’s multiple had a bit of a regime shift in late 2005.  After that point, P/Es were generally higher with an average of 36.1x.  Though the P/E also appears more volatile, the standard deviation of the smaller sample is 10.9x vs 11.4x for the entire history displayed.

Fair value at long term P/E mean = $21.79 x 28.8x = $628

Fair value at 9/2005 through current P/E mean = $21.79 x 36.1x = $726

Source: Bloomberg


Vol and Vol

px and volume 11-1-18

Volume and volatility.  There won’t be much substance in this post.  It is meant to take stock of recent price action.  Maybe someday we’ll look back at today as “simpler times”.

Bloomberg and Yahoo both report today’s volume at 69k shares which is ~5x a normal day’s volume and ~3x of that of a heavy day.  If we approximate a VWAP of $700 today, it is estimated that $48MM in market value of shares traded today which represents just under 1% of the closing market cap.  For comparison, AMZN had 1.2% in turnover.  The takeaway is that it takes extremely heavy (relative) volume to come close to a “typical day” in a large cap stock.

What’s driving it all?  Your guess is as good as mine.  The 10-Q isn’t out yet.  That doc presumably contains material non-public information so there is a chance the Trust isn’t back to buying yet.

The upside to heavy sell off today is that someone or multiple someones all put their money with their mouth is and bought heavy size today.

It’s tempting to wonder if the name is being pushed around by a sophisticated trading desk taking advantage TPL’s typical gaps in the offer and bid stacks.  Wouldn’t be hard for them to take out many, many stop losses along the way.

Either that or HK is selling…   There, I said it.


Source: Nasdaq

P/E Corridor

pe trailing

TPL, with its 10/30 closing price of $710, stands at a 38 P/E relative to trailing 12mo earnings of $18.63 per share.  After earnings print (tomorrow??), trailing 12mo earnings could migrate to $22.27 per share if the $7 estimates are correct ($7 goes in, $3.36 Q317 drops out).  If P/E stays at the low end of its recent corridor range, we get to $846 (38 x $22.27).

For fun, a 2016 energy selloff-type move to 20x gets TPL to $445 after assumed earnings.  That looks to be close to the floor on valuation.

Also after assumed earnings, a reversion to long term 30x trailing 12mo EPS puts TPL at $668.  Pretty close to where we are now.

If the price doesn’t move after earnings print, $22.27 trailing 12mo earnings at $710 implies a 12mo trailing P/E of 31.9x.  In that case, TPL would be very close to average long term historical valuation though you could argue that the income picture has changed substantially over the observed time period.

What’s the right P/E for the new watery, minerally, and sundry-y TPL?

pe trailing long

Source:  Bloomberg