We recently published a list of 12 Stocks That Could Split in the Near Future. In this article, we are going to take a look at where Texas Pacific Land Corp. (NYSE:TPL) stands against other stocks that could split in the near future.
Stock splits don’t change how much a company is worth, but they make each share cheaper and easier for people to buy, considering it’s a forward split. Stock splits can vary from a simple 2-for-1 split to a larger 100-for-1 split or more. In a 2-for-1 split, each share is turned into two new shares. This makes each share half the price, but the total value of the company remains the same. For example, if a share costs $100, after a 2-for-1 split, you’ll have two shares that cost $50 each. This can make it easier to buy shares and attract more people to invest. Even though the share price goes down, the total amount of money paid out to shareholders stays the same. Hence, splitting shares doesn’t change how much control existing shareholders have in the company. The main goal is to make the company’s stock more appealing to investors. There’s no proof that stock splits make a company better, but they can make investors feel more positive about the company. But with these benefits come the costs and risks. The process requires legal work and can be expensive.
Splitting a stock doesn’t change a good company into a bad one or vice versa. The price might go up a bit after the split, but it won’t change the company’s long-term fundamentals. Sometimes, a low stock price can actually look bad for a big company. Still, many companies practice splitting stocks if their share prices are growing too high.
2025 Outlook
On January 16, Mark Newton, Fundstrat Global head of technical strategy, joined ‘Squawk Box’ on CNBC to discuss that the long-term market trends look positive. The market initially experienced a cooler-than-expected jump, but concerns were raised about the breadth of the market and the potential impact of interest rates on small-cap stocks. Mark Newton expressed a constructive view but noted that the market’s breadth had deteriorated significantly, with only about 25% of stocks currently above their 50-day moving average. This decline was particularly evident in sectors like healthcare, where seven sectors lost more than 4% in the last month.
Despite these challenges, Newton highlighted that technology stocks had rebounded, helping to keep indices afloat and maintaining long-term trends. However, he noted that near-term sentiment had become pessimistic regarding the potential policies of the president-elect, which added to market uncertainty. He maintained his target for the S&P 500 at 6650, suggesting that interest rates might begin to roll over in the coming months, which could be bullish for equities given their recent correlation with treasury yields.
Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of the top stocks trading over $400 as of January 19. We then selected the 20 stocks with high surges in their share prices in the past 5 years and a history of splitting stocks. From that, we picked the top 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A pipeline running through a rural landscape, a reminder of the companies oil and gas Royalty Interest.
Texas Pacific Land Corp. (NYSE:TPL)
Share Price as of January 19: $1,412.80
Surge in Share Price in 5 Years: 434.56%
Stock Split Confirmed: No
Number of Hedge Fund Holders: 20
Texas Pacific Land Corp. (NYSE:TPL) is an energy company that focuses on land and resource management in the Texas Permian Basin. It owns oil and gas royalties and manages surface land, while also providing water services to oil and gas operators in the region.
The company’s produced water royalties business primarily contributes to its profitability. So it makes money by allowing operators to utilize its surface land for saltwater disposal (SWD) operations. It has agreements with operators that provide it with exclusive rights to offtake produced water for treatment and resale.
In Q3 2024, produced water royalty volumes surged by 46% year-over-year, driven by the expansion of commercial arrangements with third-party customers. Texas Pacific Land Corp. (NYSE:TPL) is on track to collect royalties on over 1 billion barrels of produced water in 2024, generating ~$100 million in revenue, which matches last year’s record income from this segment. This is an increase from virtually zero produced water royalties in 2016 before the company pursued these agreements.
Texas Pacific Land Corp.’s (NYSE:TPL) expects this business to grow driven by acquisitions of surface acreage and ongoing commercialization efforts. For instance, it recently acquired 7,490 net royalty acres in the Midland Basin, which boosted production and promises future cash flow growth.
Wedgewood Partners highlighted the company’s strong performance but sold its shares due to a sharp stock price increase driven by index inclusion. The firm believes that the company’s intrinsic value hasn’t significantly changed and expects potential re-investment after market enthusiasm subsides. It stated the following regarding Texas Pacific Land Corp. (NYSE:TPL) in its Q4 2024 investor letter:
“Texas Pacific Land Corporation (NYSE:TPL) was a top contributor to performance during both the quarter and the year. Texas Pacific Land continues to be an extraordinarily unique and profitable business. The Company owns over 800,000 surface acres of land in the Texas Permian Basin. The vast majority of this land was acquired in the year 1888 and more recently (i.e. the last 15 years) this land became highly productive oil and gas royalty acreage thanks to modern drilling and completion techniques and technologies. Despite all of these deserved accolades, we liquidated our positions after the stock rallied quite sharply upon being consecutively added to two major stock indexes over the past seven months. The earnings power of the Company has not substantially changed over the past seven months (for better or worse). However, passive indexes and the traders and managers that closely follow and benchmark against those indexes effectively tripled their appraisal of the Company’s corporate value, while that value never changed. We will continue to monitor Texas Paci7ic Land from the sidelines and would hope to invest in them again, perhaps after the market’s “animal spirits” subside.”
Overall, TPL ranks 12th on our list of stocks that could split in the near future. While we acknowledge the growth potential of TPL, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
