TPL

[admin]

Another interesting chart..

Closed the week at $274.80 (the charts are self-updating) after a mighty rally that brings it in deep overbought territory. Having said that, it's an interesting business model. The company sits on a lot of land in Texas, which they collect oil and gas royalties and other income (easements and sundry income) and sell from time to time. The proceeds they pay out in dividends (31 cents last year) and buybacks (2.5% of outstanding shares last year), basically they slowly liquidating.

It's a simple business model really. No marketing, manufacturing, risk of competition, but it's somewhat sensitive to the energy business. Oil and gas production is rising briskly at their land, but royalty income have declined in 2015 and the first half of this year due to the crash in the oil price.

The rally since early September is hard to explain. It could be a re-evaluation of the business on the basis of an energy recovery, but the first half of this year they hardly sold land, so EPS the first half year ($2.17) was well below that of the first half of 2015 ($3.58). Perhaps there will be substantial land sales in the second half of the year, otherwise EPS is likely to be lower this year compared to last.

In any case, it's way overbought, on that basis a short is possible. But be careful, it isn't very liquid.

[admin]

We wrote an article (here). Pity we missed the rally, this is a terrific, in fact, unique business model. Even if it's highly overbought, I don't see too much value in shorting even for a short-term pullback, which very well could materialize and we hope it does as it should be bought in such event.

[admin]

Well, we were a little early with it, but it's now correcting significantly, down to $255

[admin]

Wall Street investors have fallen in love with properties in the Permian Basin, and that is making some West Texas oil men nervous. Even though a barrel of oil commands half what it did two years ago, the price being paid by companies for drillable acres in the prolific oil field has shot up to never-before-seen levels. In recent weeks, some have paid upward of $40,000 an acre for drilling leases—about eight times what similar properties fetched two years ago, when oil prices were close to $100 a barrel. Companies such as  Pioneer Natural Resources Co. and Occidental Petroleum Corp. have said their land in the Permian Basin, where there are layers of oil-bearing rock stacked on top of each other, holds substantial oil reserves that can be tapped in tandem, making each acre more valuable than in a typical oil field. As others pile into the Permian, veterans of the region’s oil fevers worry that the current lease prices will set off another boom that will be quickly followed by an inevitable bust. The region has experienced booms before, notably in the early 1980s and again in 2008 and 2014, all of which were followed by busts.

Skyrocketing West Texas Land Prices Have Oilmen Uneasy - WSJ

TPL only has to collect the royalties..