How much of the increased IRR from share repurchase was due to multiples expanding? That is not foreseeable / under mgmt control and therefore it probably shouldn't be in a cost of capital calculation... if you re-ran the IRR from repurchase #s but kept the multiple flat, what kind of return would they have earned (from growth in underlying CFs)?
To be fair, a lot of the earnings growth in TPL is not under management control as it is from passive royalties. Though, I would imagine that it wasn't too much of a surprise for them to have the company included in an index. Knowing that was in the cards combined with an low-liquidity stock, and it's not too hard to imagine what happens to a stock.
Very interesting analysis. Do you think that they should repurchase under any conditions? In some periods between 2020-2024, valuations were really high. Does it make sense to buy back at P/Es of 50+, when your buyback yield is basically less than 2%. I would rather prefer opportunistic buybacks, which they could obviously do a few times during this period.
No, they should not purchase shares under any conditions, but over the last five years, there were ample opportunities in which they could have deployed capital via buybacks. I don't think it is a lack of opportunity, I think it is a lack of desire and a misalignment of incentives.
How much of the increased IRR from share repurchase was due to multiples expanding? That is not foreseeable / under mgmt control and therefore it probably shouldn't be in a cost of capital calculation... if you re-ran the IRR from repurchase #s but kept the multiple flat, what kind of return would they have earned (from growth in underlying CFs)?
To be fair, a lot of the earnings growth in TPL is not under management control as it is from passive royalties. Though, I would imagine that it wasn't too much of a surprise for them to have the company included in an index. Knowing that was in the cards combined with an low-liquidity stock, and it's not too hard to imagine what happens to a stock.
This is so well written and its supported by data and clearly explainable charts. Much better than VIC! Thanks for sharing
Thank you for the kind words.
What do you think about the future of oil? It seems that the TPL revenues correlates to oil price. https://imgur.com/a/GqZSJ19
I think oil will be used for a long time. If not in transportation, as the base raw material for chemicals.
I think NATGAS is primarly used in USA for chemicals, because how cheap it is.
Very interesting analysis. Do you think that they should repurchase under any conditions? In some periods between 2020-2024, valuations were really high. Does it make sense to buy back at P/Es of 50+, when your buyback yield is basically less than 2%. I would rather prefer opportunistic buybacks, which they could obviously do a few times during this period.
No, they should not purchase shares under any conditions, but over the last five years, there were ample opportunities in which they could have deployed capital via buybacks. I don't think it is a lack of opportunity, I think it is a lack of desire and a misalignment of incentives.
Yes, there were definitely opportunities!
What are your thoughts on $LB?
I like the business they put together. Will be interesting to see if their non-binding LOI for a datacenter goes definitive.