Divergent Capital
Private Investor & Writer, Capital-Light Businesses & Special Situations
Natural Resource Partners is best bought at a cyclical trough, because a royalty business can deploy capital at depressed prices and then gain from any commodity price rise without operational risk. A post the author replies to calls it a good-to-great royalty business that rapidly paid down debt from operating cash flow and trades at a high-teens free cash flow yield. x.comÂ
Royalty Pharma is a profitable biotech that earns mostly from royalties rather than an unpredictable pipeline, and it has the best-looking chart in the market right now. x.comÂ
Uranium Royalty is a royalty play on a widening uranium supply deficit. Q1 FY2027 net profit hit a record $16.3 million, with EPS of $0.10, double the $0.05 expected. Benchmark Mineral Intelligence sees this year's mine-supply deficit widening to 18% of demand in 2027, and UROY holds royalties on McArthur River and Cigar Lake. The chart is breaking out of a falling wedge, with $4.22 the trigger. x.comÂ
Occidental Petroleum is mispriced at about 8.4x trailing earnings and an 8.7% free cash flow yield during an oil shock. Eight times earnings in an oil shock is not a valuation but a clerical error with a ticker symbol. Iran cannot beat the US Navy, so it is waiting out America's vote in 49 days, since Iran does not vote until 2028; owning Occidental beats hiding in Treasuries. x.comÂ
Texas Pacific Land gets a tailwind for its royalty stream as oil spikes on renewed Iran tensions. The stock fell from about $450 to $375 on fear tied to a headline about a major shareholder, not anything fundamental. Its water-treatment business is a growth story most investors are not yet pricing, with a national-security angle on top. A pullback near $400 would be a buying opportunity. x.com x.comÂ
EQT, Range Resources, Expand Energy, Magnolia Oil & Gas and EOG Resources are cyclicals catching an earnings tailwind before the crowd notices, the setup Peter Lynch loved. They passed a screen alongside Coterra, all natural gas or oil producers with disciplined balance sheets and forward P/Es of 9-12. x.comÂ
Gold royalty and streaming companies remain worth adding even with gold far above $3,200-3,700, because their valuations are low versus history and they can still generate alpha even if gold is unexciting over 3-5 years. Silver and rising industrial demand add support. Unlike miners, which are boom-bust, they earn from mines without operating them. Buying Wheaton Precious Metals, Royal Gold, Osisko and Franco-Nevada is on hold after gold's recent jump. x.comÂ
Texas Pacific Land is not a buy here because energy is much closer to a top than a bottom in terms of panic. It would need to fall about $100 further, or energy stocks would need to drop back to earlier lows, before it is worth buying. Energy should be bought amid pessimism and belief in a never-ending glut, typically after an economic calamity sends oil down big, not during a war with Iran. @jc_tricky counters that the energy sector's breakout above 20-year resistance makes those lows unlikely. … Show more
