TPL

Texas Pacific Land ($TPL) Directors' Conviction: Persistent Insider Buying Despite 150% Stock Surge - A Signal of Long-Term Value?

03/20/2025 17:02

Texas Pacific Land ($TPL) has seen its stock price more than double over the past nine months, while company insiders continue to steadily purchase shares, drawing significant investor attention. Particularly notable is the consistent stock acquisition by board member Murray Stahl and major shareholder Horizon Kinetics Asset Management LLC. $TPL's share price has climbed steadily from approximately $580 in early June 2024 to over $1,700 by late November, before settling at around $1,350 following a slight December correction. This impressive upward trajectory has been supported by positive factors including the company's inclusion in the S&P 500 index in November 2024 and the announcement of a special quarterly dividend of $10 per share. Texas Pacific Land is one of the largest private landowners in Texas, holding approximately 880,000 acres across 20 counties. The company's primary revenue streams are oil and gas royalties (accounting for about two-thirds of revenue) and water services necessary for hydraulic fracturing operations. Its vast land assets in the Permian Basin of West Texas provide significant value to energy companies. Examining insider trading data reveals that Director Murray Stahl has consistently purchased 10-12 shares almost daily since August 2024. These acquisitions are part of a pre-planned trading program under Rule 10b5-1, allowing for regular purchases regardless of price fluctuations. He began buying at around $800 per share and has continued consistently even as prices climbed to over $1,400. Meanwhile, Horizon Kinetics, which holds approximately a 16% stake in TPL as a major shareholder, has maintained regular small purchases of 1-3 shares at a time. Notably, there's a complex ownership relationship between Murray Stahl and Horizon Kinetics, with Stahl holding an indirect interest in approximately 156,083 shares through his connection to the asset management firm, according to internal reports. Conversely, some executives have sold shares. CFO Chris Steddum sold 350 shares in November 2024 and 750 shares in March 2025, while CAO Stephanie Buffington sold 210 shares in November 2024. However, these sales are relatively small compared to the overall insider purchases. $TPL's financial performance is impressive. The company reported net income of $106.36 million for Q3 2024, maintaining an exceptional gross profit margin of 93.47% and a net profit margin of 64.32%. Particularly notable is its debt-free status, a significant advantage in the current high-interest-rate environment. The company's ability to generate over $700 million in annual revenue and more than $450 million in net income represents attractive profitability metrics for investors. However, TPL's current P/E ratio stands at 66.9, significantly higher than typical energy and real estate companies. While this premium valuation reflects the company's unique business model, high profitability, and debt-free operations, it may present concerns about valuation for some investors. Additionally, some analysts have expressed worry that free cash flow has not kept pace with reported earnings in recent financial reports. In the context of the oil and gas industry, increased oil price volatility in early 2025 has influenced TPL's stock performance. The energy sector, including TPL, benefited following Donald Trump's announcement canceling Venezuela oil licenses, but energy stocks have recently declined amid supply-demand concerns and recession possibilities. Looking ahead, TPL is exploring new revenue sources beyond traditional oil and gas royalties. The company is particularly investigating opportunities to lease land for data centers, which could align with the expansion of AI infrastructure in the United States and potentially serve as a growth driver. Water sales and water resource services have also become established as important revenue streams. In the short term, oil price volatility and macroeconomic uncertainties may impact TPL's stock price, but the long-term outlook remains positive based on the company's extensive land assets, debt-free management, and high profitability. The consistent pattern of insider purchases, despite the high valuation, serves as a strong indicator of confidence in the company's long-term prospects. Investors should consider TPL's high P/E ratio and cash flow concerns while also weighing the positive signals from insider buying patterns, the company's unique business model, and its solid financial structure with zero debt. Murray Stahl's consistent purchasing pattern, regardless of price volatility, can be interpreted as an important signal of long-term confidence in the company's value.

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