TPL

Texas Pacific Land ($TPL): Why Murray Stahl's Daily Buying Signal and 35% Fee Hike Prospects for 2026 Command Attention

05/29/2025 15:37

Texas Pacific Land ($TPL) has captured significant investor attention with its remarkable 94%+ surge over the past year, while continuous insider buying activity signals strong management confidence. Notably, Director Murray Stahl's near-daily concentrated purchases and major shareholder Horizon Kinetics' steady stake expansion demonstrate robust conviction in the company's prospects. $TPL operates a distinctive business model that differentiates it from traditional oil and gas producers. The company owns approximately 873,000 surface acres and 207,000 net royalty acres in the Permian Basin, focusing on oil and gas royalties and water services. This asset-centric approach minimizes operational risks associated with direct production while generating stable cash flows. Insider trading analysis reveals Murray Stahl's impressive buying pattern since August 2024. He has consistently purchased 10-12 shares almost daily, accumulating millions of dollars worth of additional stakes. Stahl, founder and portfolio manager of Horizon Kinetics Asset Management, brings over 30 years of value investing expertise. His investment philosophy centers on long-term holdings of undervalued companies relative to intrinsic value, making his persistent $TPL purchases a strong signal of confidence in the company's long-term growth potential. Horizon Kinetics has also maintained consistent small-scale purchases since June 2024. Currently holding approximately 16% of shares, this asset manager ranks among $TPL's largest shareholders, consistently maintaining positive views on the company's unique business model and growth prospects. Their buying pattern reflects strategic long-term investment focused on fundamental value rather than market timing. However, some executive sales warrant attention. In November 2024, CFO Chris Steddum sold approximately $700,000 worth of shares, while in March 2025, Officer Micheal Dobbs sold about $1.46 million. These sales appear to represent profit-taking during periods when shares approached historical highs, with overall insider activity remaining purchase-dominated. $TPL's financial performance is highly impressive. The company recorded $727.76 million in trailing twelve-month revenue with an exceptional 63% profit margin. Q1 2025 revenue increased 13% year-over-year to $196 million, with net income growing 5.4%. Particularly notable is the 25% year-over-year increase in oil and gas royalty production to 31,100 barrels per day, indicating continuous improvement in core asset profitability. The company's debt-free management structure represents another significant strength. With $460.38 million in cash and a current ratio of 7.8, $TPL maintains excellent financial stability. This robust financial structure provides flexibility for future growth investments and shareholder returns. Permian Basin industry trends favor $TPL's operations. Continued regional oil and gas production activity drives stable royalty income growth, with particularly strong expansion in water services. Q1 2025 water segment revenue reached $69 million, up 11% year-over-year. Produced water volumes are expected to increase from current levels of 12-15 million barrels per day to 18-20 million barrels per day by 2028-2030. Easement renewals beginning in 2026 represent an important growth catalyst. New contracts with Consumer Price Index (CPI) escalators are expected to drive approximately 35% fee increases, ensuring stable revenue growth over coming years. However, investors must consider several risk factors. $TPL's current valuation appears quite elevated, with price-to-earnings ratios around 60x and price-to-sales ratios near 39x, significantly exceeding industry averages. While this reflects market recognition of the company's unique business model and growth prospects, it also suggests substantial downside risk during earnings disappointments. Additionally, the company's negative $52.55 million levered free cash flow over the past twelve months warrants careful attention. Despite high net income, limited cash generation may reflect substantial capital investments or differences between accounting profits and cash flows. Oil price volatility remains an important risk factor. Although less sensitive than direct producers, royalty income remains correlated with oil prices. Q1 2025 results demonstrated this sensitivity when oil price declines (7.5% decrease per barrel) caused core profits to miss market expectations. Extended periods with oil below $60 per barrel could reduce operator activity and negatively impact royalty income. The market has also noted $TPL's S&P 500 inclusion as a significant event. While shares declined 4.6% on the first trading day in November 2024, this appears to be temporary adjustment, with long-term expectations for increased institutional interest and improved liquidity. Key upcoming catalysts include quarterly earnings releases, progress on 2026 easement renewal negotiations, and water infrastructure expansion project developments. New pipeline projects in the Permian Basin are expected to alleviate water handling bottlenecks, benefiting the water services segment. Overall, $TPL represents an attractive investment opportunity with its unique business model, strong financial structure, and clear growth drivers. Murray Stahl and Horizon Kinetics' continuous buying signals strong conviction from management and major shareholders. However, investors must carefully consider risk factors including high valuations, free cash flow concerns, and oil price volatility.

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