Black Bear Value Partners, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. A quarterly portfolio return of +1.6% was recorded by the fund for the first quarter of 2022 increasing its year-to-date return to +1.9%. Meanwhile, its benchmarks, the S&P 500 and HFRI Index delivered a +3.7% and +0.2% returns respectively for the same period. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Black Bear Value Fund mentioned Texas Pacific Land Corporation (NYSE:TPL) and explained its insights into the company. Founded in 2011, Texas Pacific Land Corporation (NYSE:TPL) is a Dallas, Texas-based land holding company with an $11.2 billion market capitalization. Texas Pacific Land Corporation (NYSE:TPL) delivered a 16.79% return since the beginning of the year, while its 12-month returns are down by -9.58%. The stock closed at $April 12, 2022. per share on April 13, 2022.
Here is what Black Bear Value Fund has to say about Texas Pacific Land Corporation (NYSE:TPL) in its Q1 2022 investor letter:
“TPL had fallen out of our top 5 in our past letter due to the increase in value of other investments and a modest reduction in our holdings. Additionally, I was cautious as there were some corporate governance issues to be addressed. We appreciate and express our thanks to management as well as some of our fellow shareholders for resolving one of the matters and having the unqualified Board Member exit the Board of Directors.
As a reminder, TPL is a royalty company with 100% of their acreage located in the Texas Permian Basin. In a nutshell they make money when drilling activity occurs but DO NOT have the capital needs as they simply provide access to land.
The incremental amount of work on TPL’s part is minimal as the extraction and movement of the oil/natural gas is undertaken by others. They are merely a toll collector with Returns on Capital of 80+%.
In an inflationary environment, businesses that have lower capital intensity both in capital assets and people stand to benefit. In other words, if oil goes up a lot, the incremental cost to TPL is close to 0 so it’s all incremental profit. This is a business that should benefit in a massive way if we have energy inflation. In the meantime, we likely own it at a 3-4% free cash flow yield with massive upside.”
Photo by Blake Wheeler on Unsplash
Our calculations show that Texas Pacific Land Corporation (NYSE:TPL) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Texas Pacific Land Corporation (NYSE:TPL) was in 24 hedge fund portfolios at the end of the first quarter of 2022, compared to 24 funds in the previous quarter. Texas Pacific Land Corporation (NYSE:TPL) delivered a 19.17% return in the past 3 months.
In March 2022, we published an article that includes Texas Pacific Land Corporation (NYSE:TPL) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
