TPL

Texas Pacific Land ($TPL) Insiders Continue Buying Despite 125% Stock Surge – What Do They See?

05/21/2025 15:02

Texas Pacific Land ($TPL) has shown a remarkable trajectory over the past 12 months. Trading at around $580 in early June 2024, the stock has surged to about $1,400 today, delivering over 125% returns. This performance substantially outpaces the S&P 500's 11% gain during the same period. Amid this steep ascent, one pattern stands out – the relentless stock purchases by $TPL insiders, particularly board members. Texas Pacific Land operates with a business model unlike typical energy companies. Founded in 1888, the company doesn't directly produce oil and gas but instead owns approximately 207,000 net royalty acres in the Permian Basin, focusing on land and resource management and water services. This royalty-based model allows TPL to benefit from oil and gas production while being less exposed to direct commodity price fluctuations. The most striking insider activity comes from Director Murray Stahl, who has consistently purchased 10-12 shares almost daily from August 2024 through May 2025. Notably, these purchases continued throughout the stock's dramatic rise from $800 to as high as $1,700. Despite the stock's increasing valuation, Stahl's buying pattern remained uninterrupted. Major shareholder Horizon Kinetics Asset Management LLC displayed a similar pattern, making small but regular purchases (1-3 shares) from June 2024 through February 2025. Horizon Kinetics currently owns over 16% of TPL with more than 1.27 million shares, and Murray Stahl is connected to this firm. Stahl directly owns 2,474 shares and has pecuniary interest in approximately 53,550 shares indirectly. These persistent purchases continued even after TPL's Q1 2025 results fell short of Wall Street expectations. On May 7th, TPL reported Q1 2025 revenue of $196 million (up 13% year-over-year) and net income of $120.7 million (up 5.4% year-over-year). However, its adjusted core profit of $169.4 million missed Wall Street's estimate of $180 million, partly due to oil prices declining 7.5% to $71.05 per barrel during the quarter. Stahl's buying stands in contrast to modest selling by some executives. CFO Chris Steddum sold 350 shares on November 14, 2024, while CAO Stephanie Buffington sold 210 shares that same month. Officer Micheal Dobbs sold 1,150 shares on March 13, 2025. These sales occurred near the stock's peak, though the volumes represent relatively small portions of their total holdings. TPL's financial performance supports the insiders' positive outlook. The company boasts an impressive 63.24% profit margin, and its return on equity (ROE) of nearly 40% is almost triple the industry average of 14%. Additionally, TPL operates with no debt and holds approximately $460 million in cash. Some investors, however, express concern about TPL's high valuation. With a P/E ratio of approximately 69 and a P/S ratio exceeding 43, these multiples are several times higher than those of traditional energy companies. Nevertheless, the consistent insider buying signals strong conviction in the company's long-term value. Industry experts note that TPL's unique business model may warrant a different valuation than traditional energy companies. Its royalty-based income and land assets allow it to benefit from increased energy production while reducing direct exposure to commodity price volatility. TPL also joined the S&P 500 in November 2024, further enhancing its market position and liquidity. As of May 2025, the energy sector faces challenges from increasing supply and tariff uncertainties. However, the persistent buying by TPL insiders, particularly Director Murray Stahl, demonstrates strong confidence in the company's long-term prospects despite these short-term challenges. The royalty-based business model, strong financial condition, and continued production growth in the Permian Basin provide TPL with a foundation for more stable growth than typical energy companies – this appears to be the clear message from insiders. Investors should remember that insider trading patterns tend to be more closely linked to a company's intrinsic value and long-term outlook rather than market sentiment or short-term price movements. In Texas Pacific Land's case, industry-leading profitability and debt-free financial structure partly explain why insiders continue to increase their stakes despite the high valuation.

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