Revealed: Whitney Tilson’s “Chaffee Royalty” Stock

Dylan Rieger // Stocks


July 31  

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Today we're going to look at a stock teaser from Whitney Tilson that hypes an investment called Chaffee Royalties.

He claims he knows an investment that can get you 10 times your investment.

The problem is that he wants you to pay him thousands of dollars to learn the name of this company.

The good news is he left enough clues in the presentation to figure out the stock, and I reveal it in the video below.

Additionally, I'll give you information on the company so you know if it's worth investing in.

Let's get started now.

Transcript Of Video

Before we reveal the stock, let's take a look at the teaser and what Whitney has to say.

Summary Of Teaser

The company he's teasing is a royalty company that is named after the founder of royalties, James Chaffee.

A royalty is a payment received by the owner of an asset from someone else for the use of the asset. Often the asset consists of intellectual property, such as a patent, trademark, or copyrighted material. Royalty investing is a type of investment where the business gets money based on future revenue. The investors receive a percentage of the company's revenue as royalties, which are negotiated and laid out in a licensing agreement.

Royalty investing is a fairly low-risk and stable alternative to stocks, as it provides a guaranteed monthly payment. Royalty funds are a form of investment fund that raises capital to purchase the right to a royalty on a product or service. There are many different sources of royalties, such as oil and gas, mining, music, books, films, and business funding.

The hints that Whitney leaves about the royalty company he's teasing are that it's $16 a share in natural gas and was founded by a guy named Tom in 1987.

What Is Black Stone Minerals?

The name of the company Whitney is pitching is called Black stone Minerals.

Black Stone Minerals is a Houston-based oil and natural gas corporation that owns and manages oil and natural gas mineral and royalty assets across the United States. The company's core product is theownership of oil and natural gas mineral interests, which grants the company a share in the proceeds generated from oil and gas production on its properties.

The company was founded in 1876 as W.T. Carter & Bro. and has evolved into one of the leading portfolios in the U.S. with over 20 million acres of mineral and royalty assets. The company is publicly traded on the New York Stock Exchange under the symbol BSM.

What Are The Pros Of Black Stone Minerals?

There's many reasons this might be an attractive investment.

Some include:

-Number 1, Low risk: Because they don't have to deal with the operational and environmental risks of drilling and producing oil and gas, they have a much lower exposure to volatility and uncertainty in the market. They also have a diversified portfolio of assets in over 40 states and 60 productive basins, which reduces their dependence on any single region or play.

-Number 2, High margin: Because they don't have to incur the capital and operating expenses of drilling and producing oil and gas, they have a very high margin on their revenue. In fact, their margin was over 80% in the first quarter of 2023, which is one of the highest in the industry.

-Number 3,  Stable cash flow: Because they have long-term contracts with producers that guarantee them a minimum payment regardless of production volumes or commodity prices, they have a very stable and predictable cash flow. They also have a low leverage ratio and a strong balance sheet, which gives them financial flexibility and resilience.

 -Number 4, Attractive distribution: Because they are structured as a master limited partnership (MLP), they pay out most of their cash flow to their unitholders as distributions. Their current annualized distribution is $1.44 per unit, which translates to a yield of over 8% at the current unit price. That's one of the highest yields in the sector and among MLPs in general.

So, as you can see, Black Stone Minerals has a lot of pros that make it an attractive investment opportunity for anyone who is looking for exposure to the oil and natural gas sector, but with lower risk, higher margin, stable cash flow and attractive distribution.

What Are Some Cons Of Black Stone Minerals?

Investing in Black Stone Minerals (BSM) is a decision that depends on your personal risk tolerance, financial goals and market outlook. However, some possible cons of investing in BSM are:

BSM has a Zacks Rank of 4 (Sell), which indicates that it is expected to underperform the market in the next one to three months.

BSM has a Value Score of F, which means that it is overvalued compared to its peers based on its earnings, cash flow and book value.

BSM has a high dividend yield of 9.2%, which may be attractive to income investors, but also signals that the stock price is depressed and the dividend may be unsustainable or cut in the future.

BSM faces competition from other energy companies such as Crescent Energy Co, which has a higher Zacks Rank of 3 (Hold) and a lower dividend yield of 5.6%.

BSM is exposed to the volatility and uncertainty of the oil and gas industry, which depends on factors such as supply and demand, geopolitics, environmental regulations and technological innovations.

These are some of the potential drawbacks of investing in BSM, but you should also consider the pros and do your own research before making any investment decisions. 

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About the Author

Dylan is an investing and passive income watch dog. He created Level Up Your Wealth to prevent people from wasting money on scam programs and to recommend high quality offers.

Dylan Rieger

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