TPL

Texas Pacific Land ($TPL) Insiders Keep Buying Even After 900% Rally: What Value Is The Market Missing?

03/24/2025 15:10

Texas Pacific Land ($TPL) has shown remarkable stock performance in recent months. The company has recorded a 126.56% stock price increase over the past year, and an astounding 906.97% over five years. The stock, which traded around $600 in early 2024, surged beyond $1,700 in November. A notable aspect of this price appreciation is the consistent purchasing activity by insiders. Director Murray Stahl and major shareholder Horizon Kinetics Asset Management LLC have steadily acquired shares despite the rising stock price. Notably, Director Stahl regularly purchased 10-12 shares monthly through most periods, while Horizon Kinetics consistently bought 1-3 shares. Most of these purchases were executed according to Rule 10b5-1 plans, indicating pre-planned transactions regardless of price. In contrast to these insider purchases, there were some sales by executives. CAO Stephanie Buffington sold 210 shares on November 12, 2024, while CFO Chris Steddum sold 350 shares on November 14, 2024, and another 750 shares on March 14, 2025. Officer Micheal Dobbs also sold 1,150 shares on March 13, 2025. However, these sales are relatively small compared to the persistent insider buying activity. Texas Pacific Land has a unique business model, owning approximately 880,000 acres of land across 20 counties in West Texas. Its primary revenue sources are oil and gas royalties (about two-thirds) and water-related services (approximately 30%). The company was added to the S&P 500 index in November 2024, and while it declined 4.6% on its first trading day in the index (November 26), this followed significant prior gains. Financially, Texas Pacific Land is in excellent condition. With a market capitalization of about $29.26 billion, the company reports annual revenue of $705.82 million and net income of $453.96 million. Particularly noteworthy are its gross margin of 93.47% and net profit margin of 64.32%, which are exceptionally high compared to most companies. Furthermore, the company carries no debt and holds $369.84 million in cash. Despite these outstanding financial metrics and high growth, the valuation remains quite elevated. The P/E ratio stands at 64.5x, significantly above market averages. Nevertheless, the fact that insiders continue to steadily purchase shares suggests strong confidence in the company's long-term value. Murray Stahl, in particular, is a significant figure in the investment community, also serving as co-founder and CEO of Horizon Kinetics. His continued purchases carry meaning beyond typical insider transactions. Horizon Kinetics holds approximately 16% of Texas Pacific Land and is also known to have substantial investments in LandBridge. In its third-quarter earnings report, the company announced $173.6 million in revenue and $106.6 million in net income. It also declared a dividend of $10 per share, following a special dividend of the same amount in June 2024. These solid results and shareholder return policies likely influenced insiders' continued buying decisions. Looking to the future, the potential value of the company's extensive land holdings draws attention. Recent news indicates that the company is exploring possibilities for data center leases on its properties, potentially creating additional revenue streams beyond oil and gas royalties. Such diversification could support long-term growth. In conclusion, Texas Pacific Land's insider trading patterns demonstrate strong insider confidence in the company's long-term value. The fact that purchases continue despite high valuations suggests potential value that the market may not fully recognize yet. Investors should consider these insider signals while also evaluating risks associated with the elevated valuation.

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