I Own The Land - Now I Want The Pipes

Introduction

I'm going to do something today that I don't do often. I'm going to be loud about a stock that has been public for less than a year, doesn't generate free cash flow yet, pays a token dividend, and carries a GNG rating of Hold.

Pretty weird way to start an article, right?

And I'm going to tell you I think it outperforms.

The company is WaterBridge Infrastructure (WBI), and if you follow my work, you already know I'm deep in the Permian Basin. LandBridge (LB) is my single largest position at roughly 19% of my personal portfolio. Texas Pacific Land (TPL) follows at roughly 11%. Together, more than 30% of that book is a bet on the Delaware Basin. So when I tell you I want to add a third name to that cluster, understand that I'm not doing it casually. I've spent a lot of time running the numbers, reading the 10-K, the 8-Ks, the transcripts, and the 2Q deck line by line.

And note that “want” carries a lot of weight here, as I don’t have the liquidity just yet, and I want to diversify a bit before I add yet another one.

But that doesn’t keep me from writing this article.

Here's my thesis in one sentence: WaterBridge is the capital-heavy operating layer that sits on top of the same acreage my royalty stocks collect rent on. It's two years away from a free cash flow inflection that almost nobody is modeling correctly, and it has an optionality kicker most midstream investors haven't priced at all.

In other words, I’ll tell you why a midstream stock with a yield of less than 1% is a good investment.

So, let's dive in!