Insiders are buying Texas Pacific Land stock: is it a good buy?

Texas Pacific Land (TPL) stock price has gone parabolic this year, helped by its strong performance and robust insider transactions. It jumped to a record high of $1,767 this week, bringing the year-to-date gains to about 200%, making it one of the best-performing companies in the United States.

TPL stock jumps amid insider purchases

Data shows that the Texas Pacific Land insiders have been aggressively buying the company’s shares in the past few years.

According to Barchart, these insiders have bought 702 shares in the past three months. At the current price, these stocks are now worth over $1 million. Cumulatively, they have bought 2,913 shares currently worth over $4.5 million in the last 12 months.

Murray Stahl, a key insider and the Chairman and CEO of Horizon Kinetics has been one of the biggest buyers of the stock. Chris Steddum and Stephanie Buffington, the CFO and CAO have also continued to buy the shares.

Insider transactions are some of the top leading indicators that investors look at when making decisions. In most periods, stocks tend to do well when insiders are buying the shares since they have a clearer picture about what is going on. 

Texas Pacific Land is doing well

The ongoing insider transactions are happening because the company is doing relatively well. For starters, TPL is a leading company that owns thousands of acres of land, mostly in Texas. 

It owns 868,000 acres of land in Western Texas at the Permian Basin. The company also owns a nonparticipating perpetual oil and gas royalty interest under 195,000 acres of land.

TPL makes money by providing its land to companies in the oil and gas industry. As a result, while it does not produce oil and gas directly, the company benefits when the sector is doing well. 

For example, it receives a fee during the initial development phase of wells. This fee is typically for its land and other products it sells like caliche. After that, the company makes money during the drilling and completion by providing water and fees for the land.

Additionally, Texas Pacific Land makes money during production through its rights and for providing saltwater disposal. The company also receives fees from other players in the energy sector like pipelines and utility providers. 

Its oil and gas royalties are the biggest part of its business followed by easements and land sales. In addition to this, it benefits from the appreciation of its land resources over time.

Texas Pacific Land’s business has done fairly well in the past few years as its revenues have jumped from $302 million in 2020 to $631 million in the last financial year. Its net income rose to almost $450 million. 

The most recent financial results showed that the company acquired mineral interest on about 4,106 net royalty acres in the Delaware Basin for $120 million. It had royalty oil production worth 28.3k barrels of oil equivalent a day, bringing its net income to $106.6 million.

The company also declared a special cash dividend of $10 in July and boosted its quarterly cash dividend to $1.17. Therefore, this performance will likely continue doing well in the near term. 

Texas Pacific Land stock price analysis

TPL chart by TradingView

The daily chart shows that the TPL share price surged to a record high of $1,762, its all-time high. It moved above the key resistance level at $886, its highest level on November 2022. That was the upper side of the cup and handle pattern.

Texas Pacific Land shares have moved above the 50-day and 100-day Exponential Moving Averages (EMA). Most importantly, the Relative Strength Index (RSI) and the Stochastic Oscillator have moved to the overbought level.

Therefore, while the stock may continue rising, there is a likelihood that it will have a small pullback to about $1,400 and then resume the bull run. More gains will be confirmed if the stock jumps above the key resistance level at $1,762.

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