Based in Dallas, Texas, the company operates the sale, lease, and management of land in Texas. It retains oil and gas royalties and is involved in temporary cash investments. Texas Pacific Land Trust was created in 1888 as a result of the bankruptcy of the Texas and Pacific Railway Company. The company leases land to the ranching industry for grazing purposes and has benefitted a bit by the recent bounce in the housing sector.
With a market capitalization of $525 million the company is trading just above $56 dollars a shares, slightly below the company’s 52-week high of $61.51. Demand from institutions continues to be strong as the stock was trading below $55 just a couple of weeks ago. The real estate development company is poised to see strong revenue as oil and gas are being extracted under the current administrations at the fastest pace in US history. TPL’s main business is to engage in leasing operations of natural resource which puts the company in good position to prosper over the next decade. A strong shift to natural gas is expected to occur over the next couple of years that will help the company expand its operations and revenues. Profits are expected to be boosted in part due to Texas regulations on drilling being the least stringent in the nation.
Over the last three years operating profit has increased from $9.9mm, 16.398mm and most recently $30.737mm in the year-ending December 31, 2011. With total revenue increasing 70% from 2010 to 2011, we see improved margins announced for 2012 at the end of the fiscal year. The stock gets purchased on any dip with expectations of outperformance relative to expectations over the next five years.