Murray Stahl (Trades, Portfolio)’s Horizon Kinetics recently disclosed its 13F filing for the fourth quarter of 2022, giving a snapshot of its equity portfolio as of the quarter’s end.
The New York-based firm seeks long-term capital appreciation by applying a fundamental value and contrarian investing approach. The firm believes in extending its time horizon for investments instead of increasing risk.
In the quarter ended Dec. 31, the firm’s top buy was Grayscale Bitcoin Trust (GBTC, Financial), while its biggest sell was Texas Pacific Land Corp. (TPL, Financial). Additionally, one of its holdings, Brigham Minerals Inc. (MNRL, Financial), was acquired by Sitio Royalties Corp. (STR, Financial), which is reflected in the 13F.
Investors should be aware 13F reports do not provide a complete picture of a guru’s holdings. They include only a snapshot of long equity positions in U.S.-listed stocks and American depository receipts as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. However, even this limited filing can provide valuable information.
Grayscale Bitcoin Trust
The firm’s top new holding of the quarter was Grayscale Bitcoin Trust (GBTC, Financial). It bought 15,814,012 shares, giving the stock a 2.16% portfolio weight at the quarter’s average share price of $9.88.
Grayscale Bitcoin Trust is an investment vehicle that solely and passively invests in bitcoin, allowing investors to gain exposure to the major cryptocurrency without dealing with the challenges associated with buying bitcoin directly, such as storing the digital asset in a crypto wallet, protecting it from scammers/hackers, etc. The trust is in the process of suing the SEC so that it can be allowed to convert into an exchange-traded fund.
Like the asset it tracks, the trust has come down significantly in price from highs reached during the Covid bull market and is now trading around pre-pandemic levels. Over the past five full calendar years, the Trust has an average annual decline of 3.91% compared to the S&P 500’s average annual gain of 11.33%. Year to date, the trust has spiked 41.74% on renewed hope for bitcoin following the recovery of some assets from the FTX implosion that were previously thought to be lost.
Stahl was an early investor in bitcoin and is a well-known crypto bull, so it is not surprising that his firm would add Grayscale to the portfolio, especially after the price of bitcoin collapsed. In his second-quarter 2021 market commentary, Stahl even made an argument that, contrary to popular belief, bitcoin mining actually reduces energy consumption overall.
Texas Pacific Land
Stahl’s firm trimmed its top holding, Texas Pacific Land (TPL, Financial), by 16,086 shares, leaving a remaining holding of 1,489,589 shares and shaving 2.01% off the equity portfolio. The average share price for the quarter was $1,733.48.
Texas Pacific Land is a publicly traded real estate company that is the corporate successor to Texas Pacific Land Trust. One of the largest landowners in Texas, the company primarily owns and collects royalties from land in the Permian Basin and other oil-rich areas. It also provides water management services to operators drilling for fossil fuels on its land.
Horizon Kinetics has allocated more than half of its portfolio to this stock and owns 18.61% of total shares outstanding, so it is clear this is still a high-conviction position, despite the fourth-quarter reduction.
In his fourth-quarter 2022 commentary, Stahl noted that major hydrocarbon exploration companies are still ramping up activities in the Permian basin, which is promising, though Texas Pacific Land’s inclusion in many index funds could hurt its share price when credit downgrades occur due to higher interest rates. Credit downgrades for operators could also result in lower earnings for the landowner.
Sitio Royalties acquires Brigham Minerals
The firm’s 2,027,024 Brigham Minerals (MNRL, Financial) shares were acquired by Sitio Royalties (STR, Financial), so Horizon Kinetics ended the quarter with a new position worth 2,181,929 shares in Sitio Royalties. Sitio now has a 1.04% weight in the equity portfolio. The stock averaged $28.96 in the fourth quarter.
Sitio Royalties is a mineral royalty company that primarily invests in the Permian Basin and other U.S. oil basins. Its current corporate form is the result of the June 2022 merger between Desert Peak Minerals and Falcon Minerals.
Continuing its path of asset consolidation, Sitio acquired Brigham Minerals on Dec. 29, 2022. Given the timeline, it is possible Horizon may no longer be interested in the holding post-acquisition and just did not have time to sell before the quarter’s end, though I do not find that likely since virtually nothing has changed aside from asset consolidation.
As of Feb. 9, the stock trades around the same level it initially went public at. Trailing 12-month earnings per share were $1.09 for Sitio and $2.44 for Brigham (the company has not yet posted any post-merger results).
See also
The firm’s other notable trades for the quarter included an addition to Permian Basin Royalty Trust (PBT, Financial) and a new stake in Brookfield Asset Management Ltd. (BAM, Financial).
As of the quarter’s end, Horizon Kinetics held shares of 324 stocks in an equity portfolio valued at $6.06 billion. Texas Pacific Land was the firm’s top holding with a 55.44% portfolio weight, followed by Franco-Nevada Corp. (FNV, Financial) with 2.42% and CACI International Inc. (CACI, Financial) with 2.26%.
In terms of sector weighting, the guru's firm was most invested in energy, followed distantly by financial services and basic materials.
