Markets are witnessing some selling pressure leading to a correction, owing to fears regarding the early phase out of quantitative easing. While this will likely set a cat among pigeons, investors can use the opportunity to get into solid plays at discounted prices. Texas Pacific Land Trust (NYSE:TPL), EMC Corporation (NYSE:EMC), and NetApp Inc. (NASDAQ:NTAP) are some such companies whose shares have come down a bit in recent days. Here is a closer look:
Texas Pacific business model simplified
Investors may find the business model of Texas Pacific Land Trust (NYSE:TPL) overly simplified and they are not wrong in assessing this. Texas Pacific is primarily engaged in the sale and lease of land owned by it which runs into approximately 920,000 acres in 18 counties in west Texas. In addition, the company also owns acreage across the Permian Basin region which forms the basis of any investor’s investment thesis in this company. Texas Pacific Land Trust (NYSE:TPL) earns oil and gas royalties from about 50% of its acreage which allows the company to continue with its regular stock buyback program.
While royalty revenue stream is very solid, the company keeps selling some of its land holdings as a strategic step which brings some degree of variance in overall revenue. Nevertheless, the company is a hugely profitable entity with operating and net profit margins of 87% and 61.5%, respectively, in the first quarter. This was despite the fact that revenue dropped 29.8% to $6.7 million, reflecting lower land sales partially offset by higher royalties. For obvious reasons, the trust is a debt free entity and even though its valuations are very high in traditional sense, earnings per share are likely to continue growing for a long period.
Massachusetts-based EMC Corporation (NYSE:EMC) offers information technology infrastructure solutions and services to companies. Its products include enterprise storage systems and software deployed in storage area networks. The stock has hardly moved over the last quarter as the gains were pared after the company’s first-quarter earnings disappointed investors.
EMC Corporation (NYSE:EMC) reported a 5.7% growth in revenue to $5.4 billion during the three months but profit dropped slightly to $580 million, sending the shares down. However, a spate of encouraging development has again revived the stock. Initiation of quarterly dividend is among these developments and so is the expansion of its share repurchase program.