×

Subscribe Today

Get our free articles delivered directly to your email!

Continue reading

Insider Weekends – Texas Pacific Land Director Purchases Shares After Court Drama

  • August 13, 2023

When we started our Daily Event Driven Monitor and began looking at insider purchases every evening – we were shocked by one company in particular: Texas Pacific Land Corp. (TPL). Texas Pacific Land is one of the biggest landowners in Texas and earns royalties from oil & gas drilling on its land. The company had never been on our radar because only one insider was buying shares, purchase values were small on any given day and they made via a 10b5-1 plan across multiple accounts. Over time, these purchases added up – creating a chart we had simply never seen before:

Murray Stahl's Purchases of TPL
A snapshot of the TPL insider purchases, creating an absolutely fascinating chart

The purchases were all made by one investor, Murray Stahl, and while he made some direct purchases, most of them were done indirectly through various Horizon Kinetics funds. In addition to being a director of TPL, Mr. Stahl is also the co-founder and Chief Investment Officer of Horizon Kinetics.

Mr. Stahl continuously purchased shares of the company – his purchases were a regular occurrence in our Event Driven Monitor, and we would watch day after day as the stock continued to soar. The performance of Horizon Kinetics’ concentrated bets in the oil & gas industry and specifically in TPL, helped propel one of its funds to the top performing mutual fund in 2022 as discussed in this Wall Street Journal article. Three out of the top five top performing mutual funds in 2022 were Horizon Kinetics funds.

Mean reversion is one of the few things you can reasonably rely on in financial markets. In November 2022, the stock reached a peak of over $2,700 a share and began to decline. By February 2023, the stock was trading at around $1,800 a share – only $200 above when we first came across the company. This was also around the time when Mr. Stahl stopped purchasing shares.

Despite the sheer volume of Mr. Stahl’s purchases and how closely we watched the stock run up, we never truly considered TPL as an investment opportunity – thinking the drastic increase in stock price would eventually end.

After a brief hiatus of a few months, on May 5th 2023, Mr. Stahl suddenly began purchasing stock again and the stock price reached a new low of around $1,300. However, as his steady purchases continued, the stock ran up by over 40% once more – and is now trading at $1,885 a share. It is worth noting that Mr. Stahl’s initial purchases in May were much smaller than they used to be, only about $2,000 a day – but slowly, the amounts built up and Mr. Stahl is now purchasing over $35,000 worth of stock per day.

Horizon Kinetics (TPL’s largest shareholder) and the Texas Pacific Land company have had a rocky past. TPL had filed a lawsuit against Horizon Kinetics in November 2022 over voting agreements. TPL wanted to increase its shares outstanding from 7.76 million to 46.54 million, but Mr. Stahl/Horizon Kinetics as well as another board member Eric Oliver of Softvest Advisors opposed this decision. The trial took place in April, and the series of events could actually explain why the stock began to decline so rapidly – and also explained why Mr. Stahl paused his purchases of the company. On July 28th, 2023, a Cooperation Agreement was filed that withdrew Mr. Stahl’s and Mr. Oliver’s resignation letters and included certain nondisparagement provisions.

While the nature of the TPL insider purchases is rather unique, the business itself is also not your typical company. Texas Pacific Land Corp is one of the largest landowners in the state of Texas – and while the company isn’t a natural gas and oil producer, it collects revenue from many phases of the oil and gas life cycle. The company’s long history, which dates back to 1888 also includes Warren Buffett as one of its investors, when a teenage Buffett purchased shares of the company as his second stock.

On January 11, 2021 (also when Mr. Stahl began to purchase stock), the company converted from a business trust into a corporation. When infrastructure for oil and gas development is constructed, the company receives fixed fees for the use of its land and the sale of materials used in the construction of the infrastructure. During the drilling phase, TPL collects fees for providing treated produced water services, and during the actual production phase, TPL collects fees for saltwater disposal (in addition to royalties from their oil and gas royalty interests).

In the fiscal year 2022 (ended December 31, 2022) revenue increased by $216.5 million (or 48%) YoY to $667.4 million – largely due to an increase in oil and gas royalties and water sales. Operating margins improved by 3.9%, and net income for the year was $446.4 million – resulting in an attractive 64% net income. For Q2 2023, total revenue decreased by $15.7 million (or 8.9%) to $160.6 million when compared to Q2 2022. Operating expenses increased, causing net income to decrease by 15.6% to $100.4 million for the quarter. This decrease in revenue was due to a decrease in oil and gas royalties – and displays how dependent TPL is on the price of crude oil and natural gas.

While we believe that in the short term TPL will continue to do well, in the long term, the company’s fate is largely determined by the performance of the natural gas and oil industry. Royalty businesses are high margin businesses and with two directors on the board with shareholder interests in mind, TPL will be on our watchlist in case we decide to add a third oil & gas investment to our model portfolio.

Welcome to edition 694 of Insider Weekends. Insider buying increased significantly last week with insiders purchasing $62.22 million of stock compared to $100.46 million in the week prior. Selling increased to $1.43 billion compared to $1.39 billion in the week prior.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by the total insider purchases that week. The adjusted ratio for last week went up to 22.94. In other words, insiders sold almost 23 times as much stock as they purchased. This week, the Sell/Buy ratio was unfavorable, compared to the prior week when the ratio stood at 13.89.

Notable Insider Buys:

1. Asana, Inc. (ASAN): $21

President, CEO, & Chair Dustin A. Moskovitz acquired 320,000 shares of this work management platform, paying $21.64 per share for a total amount of $6.92 million. Mr. Moskovitz increased his stake by 0.78% to 41,192,803 shares with this purchase.

You can view the list of recent insider transactions for Asana, Inc. here.

P/E: -11.73Forward P/E: -65.63Industry P/E: 25.88
P/S: 7.86Price/Book: 13.08EV/EBITDA: -12.48
Market Cap: $4.55BAvg. Daily Volume: 2,535,82552 Week Range: $11.32 – $29.18

2. CVB Financial Corp. (CVBF): $19.28

Director George A. Borba acquired 257,704 shares of this regional bank, paying $19.37 per share for a total amount of $4.99 million. These shares were purchased indirectly by George Borba & Son Dairy, L.P., a California limited partnership.

You can view the list of recent insider transactions for CVB Financial Corp. here.

P/E: 10.83Forward P/E: 11.68Industry P/E: 10.07
P/S: 4.84Price/Book: 1.34EV/EBITDA: 11.09
Market Cap: $2.69BAvg. Daily Volume: 1,520,13352 Week Range: $10.66 – $29.25

3. Sarepta Therapeutics, Inc. (SRPT): $108.02

Director Michael Andrew Chambers acquired 34,867 shares of this commercial-stage biopharmaceutical company, paying $106.15 per share for a total amount of $3.7 million. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for Sarepta Therapeutics, Inc. here.

P/E: -10.49Forward P/E: 25.36Industry P/E: 29.99
P/S: 10.03Price/Book: 13.59EV/EBITDA: -20.43
Market Cap: $10.06BAvg. Daily Volume: 1,334,25152 Week Range: $100.15 – $159.89

4. Tidewater Inc. (TDW): $63.29

Director Robert Robotti acquired 48,200 shares of this offshore marine support and transportation services provider, paying $63.00 per share for a total amount of $3.04 million. These shares were purchased indirectly by Robotti & Company Advisors, LLC.

You can view the list of recent insider transactions for Tidewater Inc. here.

P/E: 6329Forward P/E: 8.65Industry P/E: 8.62
P/S: 4.09Price/Book: 3.61EV/EBITDA: 20.45
Market Cap: $3.22BAvg. Daily Volume: 829,96152 Week Range: $19.31 – $67.2

5. Cerevel Therapeutics Holdings, Inc. (CERE): $22.04

Shares of this clinical-stage biopharmaceutical company were acquired by 2 insiders:

  • President & CEO Ronald C. Renaud Jr. acquired 83,857 shares, paying $23.96 per share for a total amount of $2 million.
  • Chief Business Development and Strategic Operations Officer Paul D. Burgess acquired 21,880 shares, paying $22.93 per share for a total amount of $501,794.

You can view the list of recent insider transactions for Cerevel Therapeutics Holdings, Inc. here.

P/E: N/AForward P/E: -8.16Industry P/E: 29.99
P/S: N/APrice/Book: 9.9EV/EBITDA: -8.17
Market Cap: $3.46BAvg. Daily Volume: 614,33052 Week Range: $20.49 – $35.98

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. FTI Consulting, Inc. (FCN): $187.31

President & CEO Steven Henry Gunby sold 121,764 shares of this business advisory services provider for $182.04, generating $22.17 million from the sale.

You can view the list of recent insider transactions for FTI Consulting, Inc. here.

P/E: 29.54Forward P/E: 23.21Industry P/E: 20.18
P/S: 1.98Price/Book: 3.48EV/EBITDA: 17.33
Market Cap: $6.36BAvg. Daily Volume: 296,52752 Week Range: $140.09 – $205.63

2. KLA Corporation (KLAC): $478.98

Shares of this semiconductor company were sold by 4 insiders:

  • President and CEO Richard P. Wallace sold 35,000 shares for $504.08, generating $17.64 million from the sale.
  • EVP & Chief Financial Officer Bren D. Higgins sold 3,061 shares for $500.00, generating $1.53 million from the sale.
  • Executive Vice President Brian Lorig sold 2,738 shares for $500.00, generating $1.37 million from the sale.
  • EVP, CLO and Secretary Mary Beth Wilkinson sold 870 shares for $500.00, generating $435,000 from the sale.

You can view the list of recent insider transactions for KLA Corporation here.

P/E: 19.52Forward P/E: 18.14Industry P/E: 25.88
P/S: 6.26Price/Book: 22.43EV/EBITDA: 16.04
Market Cap: $65.72BAvg. Daily Volume: 1,071,94852 Week Range: $250.2 – $517.3

3. Parker-Hannifin Corporation (PH): $416.51

Shares of this specialty industrial machinery company were sold by 7 insiders:

  • Vice Chairman and President Lee C. Banks sold 23,638 shares for $417.13, generating $9.86 million from the sale.
  • VP & President-Aerospace Roger S. Sherrard sold 12,069 shares for $419.20, generating $5.06 million from the sale.
  • VP & President-Filtration Grp. Robert W. Malone sold 5,140 shares for $416.54, generating $2.14 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • EVP-HR & External Affairs Mark J. Hart sold 3,906 shares for $417.60, generating $1.63 million from the sale.
  • VP & Chief Digital & Info Off. Dinu J. Parel sold 2,079 shares for $416.89, generating $866,714 from the sale.
  • Director Linda S. Harty sold 1,487 shares for $424.28, generating $630,904 from the sale.
  • VP & President-Motion Sys. Berend Bracht sold 863 shares for $419.47, generating $362,003 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

You can view the list of recent insider transactions for Parker-Hannifin Corporation here.

P/E: 35.97Forward P/E: 16.55Industry P/E: 20.18
P/S: 2.8Price/Book: 5.18EV/EBITDA: 15.64
Market Cap: $53.44BAvg. Daily Volume: 785,15452 Week Range: $235.69 – $428.16

4. Ares Management Corporation (ARES): $99.47

Head of Credit Group Kipp R. DeVeer sold 200,000 shares of this asset management company for $100.13, generating $20.03 million from the sale.

You can view the list of recent insider transactions for Ares Management Corporation here.

P/E: 88.81Forward P/E: 19.62Industry P/E: 10.07
P/S: 8.25Price/Book: 10.5EV/EBITDA: 28.48
Market Cap: $30.08BAvg. Daily Volume: 992,98352 Week Range: $58.6 – $103.41

5. Salesforce, Inc. (CRM): $208.7

Shares of this software application company were sold by 2 insiders:

  • Chair and CEO Marc Benioff sold 75,000 shares for $211.70, generating $15.88 million from the sale.
  • Co-Founder and CTO Parker Harris sold 1,250 shares for $213.55, generating $266,938 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

You can view the list of recent insider transactions for Salesforce, Inc. here.

P/E: 564.05Forward P/E: 23.21Industry P/E: 25.88
P/S: 6.32Price/Book: 3.55EV/EBITDA: 30.54
Market Cap: $203.27BAvg. Daily Volume: 6,612,56252 Week Range: $126.34 – $238.22

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.

Disclaimer:  I hold a long position in Lions Gate Entertainment. Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.