TPL

Texas Pacific Land($TPL) Insiders' 11-Month Buying Spree: Investment Opportunity Emerges After 37% Correction from Highs

06/19/2025 03:59

Insider trading activity at Texas Pacific Land ($TPL) has captured investors' attention as company insiders have been purchasing shares almost daily for 11 months straight. This isn't mere coincidence - it signals insiders' unwavering confidence in the company's long-term value proposition. Texas Pacific Land is a unique energy company that owns approximately 870,000 acres in the Permian Basin, America's largest shale oil production region. Founded in 1888, the company operates an asset-light model focused on land leasing and royalty income, distinctly different from traditional oil and gas producers. As production volumes increase, royalty revenues grow proportionally, while the company avoids direct drilling and production risks. The most notable activity comes from Director Murray Stahl's buying pattern. From August 16, 2024, through June 17, 2025, he executed over 220 purchase transactions, buying shares consistently on almost every trading day. Initially purchasing 12 shares daily, he recently shifted to buying 10 shares per transaction. His total purchase amount reaches several million dollars. Stahl isn't just any director. He's a renowned value investor and founder of Horizon Kinetics, considered a successor to Warren Buffett's investment philosophy. His investment track record demonstrates exceptional ability to uncover undervalued assets, particularly in companies with complex and difficult-to-understand business models where hidden value exists. Horizon Kinetics Asset Management, associated with Stahl, has also been continuously buying during the same period. As a major shareholder holding approximately 16% of TPL shares, they represent one of the company's largest institutional investors. The synchronized buying by both entities suggests a coordinated strategy. However, some executive selling has also occurred. In November 2024, CFO Chris Steddum sold 750,000 shares, and in March 2025, Officer Micheal Dobbs disposed of 1.15 million shares. But these transactions occurred during peak price periods, appearing to be profit-taking moves that haven't altered the overall insider buying momentum. The stock chart validates insiders' judgment. TPL shares started around $580 in June 2024, surged approximately 300% to $1,723 in November, and currently trade around $1,080. While down about 37% from peaks, shares remain 86% higher than early last year levels. The company's financial health is exceptionally strong. With zero debt and $460 million in cash holdings, operating margins of 76.7% and net margins of 63.2% far exceed industry averages. 2024 annual revenue reached $705 million, up 11.7% year-over-year, with net income of $454 million. Particularly notable is water services business growth. Through subsidiary Texas Pacific Water Resources, the company provides water supply, wastewater treatment, and infrastructure development services to Permian Basin oil and gas operators. This business segment's importance grows as environmental regulations tighten. Investors should carefully monitor several key indicators. Current price-to-earnings ratio of 54x significantly exceeds the energy sector average of 15-20x. While this reflects the company's unique business model and growth prospects, it also incorporates high expectations. Should Permian Basin production growth slow or oil prices collapse, stock volatility could increase substantially. Positive signals include dividend policy. With quarterly dividends of $1.60 plus special dividends, annual dividend yield approximates 0.6%. The low payout ratio of 27.7% provides ample room for future dividend increases. The company announced a $10 per share special dividend in June 2024. Broader energy sector trends require consideration. Recent OPEC+ production increase possibilities and rising U.S. crude inventories have pressured oil prices. However, TPL's royalty-based model makes it relatively less sensitive to oil price fluctuations compared to direct producers. Future scenarios to watch include: In an optimistic scenario, continued Permian Basin production growth and water services expansion could drive shares beyond previous highs. The base case suggests trading range around current levels while providing steady dividend income. The cautionary scenario involves potential growth constraints if the shale oil boom peaks and environmental regulations tighten rapidly. Eleven months of continuous insider buying isn't coincidental. When a renowned value investor like Murray Stahl purchases shares daily, it signals strong conviction that intrinsic value substantially exceeds current share price. While high valuation and energy sector volatility present risks, the combination of unique business model, solid financials, and insider confidence creates an attractive opportunity for long-term investors.

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