We recently published a list of the 12 Stocks to Buy That May Be Splitting Soon. In this article, we are going to take a look at where Texas Pacific Land Corporation (NYSE:TPL) stands against other stocks that may be splitting soon.
Stock splits change the number of outstanding shares of a company, but not the company’s overall value. A forward split makes each share cheaper and easier to buy. Splits can range from 2-for-1 to 100-for-1 or more. In a 2-for-1 split, one share becomes two by cutting the price in half. For instance, a $100 share becomes two $50 shares. This makes shares more affordable and attracts more investors. Even though the price per share drops, the total value held by shareholders stays the same. So, splits don’t change who controls the company. The main reason for a split is to make the stock more appealing, or accessible for retail investors.
Uncertainty is Driving Selloff
Dan Suzuki, Deputy CIO at Bernstein Advisors, joined CNBC’s ‘Squawk on the Street’ on March 14 to share his perspective on the recent persistent three-week downtrend in the indexes during an interview. He explained that the sell-off is largely driven by uncertainty and its negative impact on sentiment. According to Suzuki, analyzing market movements reveals that the stocks that rallied most after the election until mid-February have seen significant declines since then and create a mirror image effect. Additionally, the most expensive and high-beta stocks have been hit hardest as the market prices are in an uncertainty risk premium. These dynamics are central to what is driving markets currently. Despite this, Suzuki noted that hard economic data remains strong and suggests that relief from headline uncertainties could reduce the risk premium.
Suzuki noted concerns over soft retail sales and spending figures, which might be due to weather or seasonal factors. However, he highlighted resilience in weekly retail sales and strong leading indicators. Prolonged uncertainty could still impact growth. Suzuki linked consumer trends to disappointing corporate guidance and persistently high inflation, which affected sentiment. He also pointed out the wealth effect caused by a stock market decline of 10% or more, particularly for investors in crowded names. Markets are adjusting to persistent uncertainty, which will continue even with relief anticipated within the next month or two, which will prevent a return to the high multiples seen in 2020-2023.
In an uncertain market with heightened risk premiums, companies considering stock splits may need to weigh the potential benefits against the backdrop of overall market sentiment. The ongoing economic uncertainty and changes in consumer behavior might impact how companies approach decisions about stock splits, especially if they are concerned about maintaining investor confidence in a volatile market.
Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of the top stocks that were trading over $400 as of March 17. We then selected the 20 stocks with high surges in their share prices in the past 5 years and a history of stock splits. 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 Q4 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An oil tanker sailing across the horizon, conveying the importance of crude oil transportation for the company.
Texas Pacific Land Corporation (NYSE:TPL)
Share Price as of March 17: $1,321.07
Surge in Share Price in 5 Years: 1023.17%
Stock Split Confirmed: No
Number of Hedge Fund Holders: 28
Texas Pacific Land Corporation (NYSE:TPL) operates within the Permian Basin. It focuses on land and resource management, as well as comprehensive water services. Its core business involves managing extensive land holdings and oil and gas royalty interests, alongside providing vital water solutions to operators in the region.
The company’s Permian Basin royalty business saw a 14% year-over-year increase in oil and gas production volumes in 2024. This drove the company to record financial performance, despite fluctuating commodity prices. In Q4 2024, royalty production reached 29,100 barrels of oil equivalent per day, which was an 11% increase year-over-year. Recent acquisitions added ~1,100 barrels of oil equivalent per day to the full-year production of 26,800 barrels of oil equivalent per day. The company now sees continued growth, which is supported by a 20% year-over-year increase in new permits and a healthy inventory of drilled but uncompleted wells (DUCs).
The company’s strategic acquisitions in 2024, particularly in August and October, also boosted its production. By acquiring mineral interests and surface assets in the Midland Basin, Texas Pacific Land Corp. (NYSE:TPL) added ~1,100 barrels of oil equivalent per day to its full-year 2024 production of ~26,800 barrels. These all-cash transactions expanded its royalty acreage and surface holdings, contributed to increased production volumes and strengthened its position in the Permian Basin.
Maran Capital Management considers the company a successful investment and stated the following regarding Texas Pacific Land Corp. (NYSE:TPL) in its Q3 2024 investor letter:
“The power of a long-term horizon coupled with an aversion to risk but a tolerance for volatility is clearly evidenced by HK’s largest position, Texas Pacific Land Corporation (NYSE:TPL), which the firm or its predecessors has owned for over 30 years. TPL’s market capitalization is now greater than $25 billion, but it was a microcap when Horizon first invested. On a split and dividend-adjusted basis, TPL traded for a dollar or so3 per share in 1994, the year of HK’s founding. It recently surpassed $1,000 per share
Owning a stock that turns a few dollars into more than $1,000 (or for those keeping track at home, a few million dollars into more than $1 billion) is obviously an incredible outcome, but high levels of conviction and equanimity in the face of volatility were required to hold onto the stock. Over the course of those 30 years, TPL experienced a 70%+ drawdown, a few 50%+ drawdowns, several more 40%+ drawdowns, and numerous 30%+, 20%+, and 10%+ drawdowns. The longest drawdown lasted almost six years…”(Click here to read the full text)
Overall, TPL ranks 12th on our list of the stocks that may be splitting soon. While we acknowledge the growth potential of TPL as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. 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.
