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Strategies & Market Trends : Value Investing
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To: Archie Meeties who wrote (9569)1/9/2000 12:39:00 AM
From: Wright Sullivan  Read Replies (1) of 78751
 
RE: Defensive Positions & Value Ideas

I have been buying TPL (Texas Pacific Land Trust) at $38 to $40 as a defensive position and to provide a counterweight to one oversized tech position (DSTM). This is an asset value buy, not a growth buy.

TPL owns some of the worst land in the country: 1.06 million acres of West Texas ranch land, mostly carried on its books at no value.

TPL in a nutshell:
- 0.405 acres of land per share
- Oil & gas rights on a much smaller no. of acres.
- $0.40 dividend (1%)
- $1.08 cash / share
- $3.45 receivables / share (land sold in past, financed)
- Permanent (100+ years old) share buyback program
(typically 2.5% to 3.5% of shares retired per year).
- Income from oil & gas royalties from owned & sold land.
(income has varied from $1.10 to $2.40 per share per year)

The current TPL price ($37.75) values their land at around $82 per acre.

TPL has limited upside. My target is around $60 during the next year. Oil & gas income should improve since the price of oil has increased, but there is a time lag before TPL sees the improvement. I am buying TPL as an asset play, not based on oil & gas speculation.

TPL has limited downside, based on land value. Look at the 10 year chart to get a better feel for historical prices. The worst case I can picture is for TPL to stagnate in the $30's for a couple years. Best case is a double to around $75.

TPL may have some use as an inflation hedge also.

Also, every few months some market prognosticator "discovers" TPL and mentions it in the media (Dick Davis Digest, CNBC, etc.), and it will spike for a time. This has happened several times over the past two years.

Comments welcome.
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