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True Story: $1,000 Turned into $56 Million, SafelyBy
Tuesday, February 8, 2011
It's the Greatest Unknown Investment Story on Wall Street...
That's what I called Texas Pacific Land Trust (TPL) when I told my True Wealth subscribers about it in mid-August last year. If you had invested $1,000 at inception, it would be worth over $56 million today – pretty darn safely. And that's NOT including dividends...
 Texas Pacific has paid dividends for over a half-century – and has never once reduced its dividend. It's also had over 110 consecutive years of positive earnings – with no conceivable end to that record.
It's an incredibly simple story...
In the late 1800s, the Texas & Pacific Railroad went bankrupt. In short, the railroad's debtholders ended up getting the railroad's land. But what would you do with 3.5 million acres of Texas land in the late 1800s? Oil hadn't yet been discovered...
The bondholders came up with a plan to liquidate the land in an orderly fashion... They put the land into a trust and called it the Texas Pacific Land Trust. The Trust has one official mission: to sell off the land over time, as offers come. The Texas Pacific Land Trust started trading on the New York Stock Exchange in 1888.
The business is the same today as it was then... It's slowly selling off its big pile of land and giving the money back to shareholders. Texas Pacific collects oil and gas royalties from its properties as well.
By charter, Texas Pacific Land Trust has to return ALL the money it takes in (after expenses) to shareholders – either in the form of dividends or buying stock and "retiring it."
This "retiring it" part is the key to the story... and what makes this an incredible investment opportunity, if you pay the right price.
These days, Texas Pacific Land Trust is buying back and "retiring" roughly 300,000 shares a year. Less than 10 million shares exist. So at the current rate, it's buying back and retiring roughly 3% of its shares a year. Said another way, the amount of acres you own per share is increasing by 3% per year.
I consider that 3% increase per year as our tax-free "stealth" dividend. You'd have to earn nearly 5% interest in a taxable account to have 3% after tax... So this 3% tax-free stealth dividend is more valuable than you might imagine.
Amazingly, the story hasn't changed much in 100 years. Here's a quote about Texas Pacific from "The Ticker and Investment Digest" from November 1909:
After selling at $5 in 1896, and again in 1898, the price crept up year by year to $94 in 1909. All income has been applied to the retirement of outstanding certificates by purchase in the market.
If the policy of retiring the certificates continues, the last certificates outstanding will evidently become exceedingly valuable... The certificates look like safe property to own, with possibilities of large profits.
Texas Pacific just released its earnings, which were excellent. With a high oil price, Texas Pacific's earnings are high. And when earnings are high, it can buy back more shares – creating more value for you, faster.
I could go on and on. But instead, let me show you the original write-up I shared with my subscribers, where I recommended Texas Pacific up to $30 a share. (That advice still stands, by the way. At $41 a share, Texas Pacific is too expensive to buy right now.) Check out my original write-up here.
Good investing,
Steve
Further Reading:
Steve's True Wealth readers have done incredibly well on his Texas Pacific recommendation. But his writeup also attracted the attention of a "rabid, half-crazed" critic. Click here for the story.
"Hundreds of percent upside, while risking only 25% on the downside? Odds like that don't come along often," Steve writes. "You ought to take them..." See what trade Steve's talking about here: Curtis Freeze Made 210% Last Year Doing This: You Can Too.
Market NotesBUYING TROPHIES WORKS! Today, we highlight our favorite strategy for making big gains in the resource business... one our colleague Matt Badiali is using to rack up incredible gains right now...
The strategy? After big selloffs, buy trophies.
The "boom and bust" natural resource sector usually sees a big crash every few years in at least one of its "subsectors," like oil, grains, precious metals, uranium, and copper. These crashes present opportunities to buy the world's largest and most valuable "trophy" deposits... often for 33 cents on the dollar. When things go from "bad to less bad" in these markets, valuable assets scream higher.
In March 2009, just after the credit crisis, our colleague Matt Badiali went trophy hunting and recommended buying a stake in "Pebble," a colossal undeveloped gold and copper deposit in Alaska. Matt recommended buying shares in Pebble's majority owner, Northern Dynasty, around $4.18.
As you can see from today's chart, buying trophies works. Things have gone from "bad to less bad" in the mining sector... and investors are flocking back to these stocks. Northern Dynasty is north of $20 per share. Matt's S&A Resource Report readers have more than quadrupled their money so far.
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