We came across a bullish thesis on LandBridge Company LLC (NYSE:LB) on Special Situation Investing’s Substack by Six Bravo. In this article, we will summarize the bulls’ thesis on LB. LandBridge Company LLC (NYSE:LB)'s share was trading at $65.21 as of Dec 30^th. LB’s trailing and forward P/E were 30.95 and 36.23 respectively according to Yahoo Finance.

An oil and gas crew working on a midstream pipeline, illuminated against a dusk sunlit sky.

Landbridge (NYSE:LB) is emerging as a compelling investment opportunity following its recent IPO, tripling its value and drawing attention due to its ties to artificial intelligence and strategic positioning in West Texas. The company’s chairman has emphasized the region’s unique advantages for large contiguous data center campuses, including minimal population density, access to water from oil production and aquifers, the lowest gas costs in North America, robust fiber connectivity, Texas's favorable regulatory environment, and promising carbon sequestration options. These factors make the Permian Basin a prime location for hyper and exa-scale data centers.

Carbon sequestration, a new revenue stream for LB, could allow the company to collect royalties on injected carbon, adding to its diverse income sources. Even without data centers, Landbridge benefits from royalties tied to mineral rights, water, caliche, and sand, demonstrating a resilient business model. The company is reportedly finalizing a data center land lease agreement, signaling that its strategy to attract technology investments is gaining traction.

An intriguing development is the involvement of Five Point Energy’s subsidiary, Powered Land, which is actively building infrastructure on LB’s acreage to accommodate hyperscalers. This proactive approach enhances Landbridge’s appeal by reducing barriers for potential tenants and increasing the land’s utility. The chairman’s vision of transitioning from large language model learning and inference to cloud computing and real-time connectivity in the region underscores LB’s long-term growth potential.

While insider selling by the chairman following the IPO raised eyebrows, the retention of a significant 53.2 million-share stake aligns with investor interests. Some perceive his 73% ownership as a risk, but it also reflects confidence and a chance to partner with a capable operator. With strong fundamentals, diverse revenue streams, and a strategic focus, Landbridge presents a robust investment case, offering multiple avenues for growth and upside potential.

LandBridge Company LLC (NYSE:LB) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 12 hedge fund portfolios held LB at the end of the third quarter which was 15 in the previous quarter. While we acknowledge the risk and potential of LB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.