TPL - Texas Pacific Land Trust

Excellent asset-light business with three bullish levers (oil royalties, growing water demand, data center optionality) but currently too expensive. He sold at the top in Nov 2024 and would only buy on a significant pullback.

He already sold his position at the absolute top in November 2024, multiplying his investment by eight times, and currently views the stock as too expensive.

Cited as an example of a company with an ~80% gross margin, which the host considers a desirable trait for a compound portfolio.

Used as a hedge in 2022 because it benefits from higher oil prices; helped offset tech losses and outperform the bear market.

Mentioned as a high-conviction 'sweet spot' investment that generated nearly 10x returns, demonstrating the power of waiting for prime opportunities.

Strong business with high margins and royalty income from oil and water in Permian Basin, but forward P/E of 43 is too high. Previously held and achieved 8x return.

Owns land in Texas — zero competitors, monopoly. Gets royalties from oil drilling on its land. Asset-light compounder with almost zero employees, printing cash every year. Business has existed since 1888. Impossible to kill. Also has a water segment.

Christophe believes TPL has a spectacular business model and strong fundamentals with revenue reacceleration likely in 2026 due to rising oil prices and increased drilling activity. However, at the current forward P/E of ~39-40, the stock is significantly overvalued. His DCF model shows 0% expected returns at current prices even with 15% earnings growth. He will only buy at $250 (forward P/E of ~25), representing a ~33% decline from current levels.

The host mentions being a current shareholder of TPL (full disclosure) and draws parallels between TPL and Balchem as long-term compounding machines. He notes TPL has generated +50,000% gains and that Larry Goldstein has held it since the 1950s, with it now comprising 40% of Santa Monica Partners' portfolio. The host covers TPL on his channel and clearly views it favorably as a royalty play with high margins and multiple revenue streams from land assets.

The speaker references TPL as a past personal investment that was almost a 10X return. He mentions it as an example of recognizing a golden opportunity within his circle of competence, not as a current recommendation.