Wedgewood Partners: “We Expect TPL’s Royalty Revenue to Continue to Compound”

Wedgewood Partners, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. For the first quarter of 2022, the fund’s Composite (net) declined by -10.6%. The S&P 500 Index declined by -4.6%. The Russell 1000 Growth Index declined -by 9.0%, while the Russell 1000 Value Index declined -by 0.7%. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Wedgewood Partners mentioned Texas Pacific Land Corporation (NYSE:TPL) and explained its insights for the company. Founded in 1888, Texas Pacific Land Corporation (NYSE:TPL)  is a Dallas, Texas-based publicly traded land trust with an $11.3 billion market capitalization. Texas Pacific Land Corporation (NYSE:TPL)  delivered a 17.09% return since the beginning of the year, while its 12-month returns are down by -7.11%. The stock closed at $1,462.25 per share on April 15, 2022.

Here is what Wedgewood Partners has to say about Texas Pacific Land Corporation (NYSE:TPL) in its Q1 2022 investor letter:

Texas Pacific Land also contributed to performance during the first quarter. Oil and gas (O&G) production on the Company’s acreage increased nearly +30% year over year. Some of the largest O&G producers in the world are focusing increasing portions of their capex budgets in the prolific Delaware basin, where most of the Company’s acreage is located. The Delaware basin’s geology (6.4 million acres in far West Texas and South-Eastern New Mexico) is uniquely endowed and formed to benefit from horizontal drilling techniques that have been developed over the past decade. As O&G customers and shareholders are increasingly rewarded for delivering higher returns on less drilling, we see them ration their budgets by jettisoning or de-emphasizing other basins in the U.S. and around the world, in favor of the developing Delaware acreage. As it is the largest single landowner in the Delaware basin, we expect the Company’s royalty revenue to continue to compound in-line with this development and could potentially double every three-to-five years, even if global benchmark oil prices retreat to the $50-$60 average of the past five years.”



Our calculations show that Texas Pacific Land Corporation (NYSE:TPL) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Texas Pacific Land Corporation (NYSE:TPL) was in 24 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 24 funds in the previous quarter. Texas Pacific Land Corporation (NYSE:TPL) delivered a 29.65% return in the past 3 months.

In April 2022, we published an article that includes Texas Pacific Land Corporation (NYSE:TPL) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

Disclosure: None. This article is originally published at Insider Monkey.