Managed Opportunities 2026 Third Quarter Review

October 2026

“Although it may seem hard to believe, patient inactivity is hard, demanding, and exhausting work.” ~ Murray Stahl

“What’s going on in Texas?” Or, “What’s going on with Texas Pacific Land?” were recurring questions throughout the quarter. The real question behind these question(s) – Why is TPL stock price down and what are you doing about it?

The stock price is down; therefore, something must be wrong… In short, there is never one reason. So many factors can drive a stock price, especially in the short-term. As to what we are doing about it? Well, nothing! Except buying for new accounts or clients adding capital to existing accounts.

We have observed nothing from a fundamental standpoint to suggest that the investment thesis has changed. In fact, stock price aside, the vectors that drive the long-term value of TPL are all still remarkably strong! While some eagerly await that flashy headline and resulting pop in stock price, we know that the real money is made in the waiting, allowing time to become your ally and the power of compounding to do the heavy lifting. The price of oil remains elevated as a consequence of the war in Iran, and now Yemen and Saudi Arabia. The price of natural gas has firmed as power demand and LNG exports grow. Demand for water and water disposal continues to grow and the value of West Texas surface acreage continues higher.

These same long-term vectors are being reinforced by an entirely new source of demand. The notion of large-scale data centers in West Texas was dismissed as absurd just two years ago around the time LandBridge came public in the summer of 2024. We have definitely moved past the ‘if’ stage. This is happening! The questions that remain are when and what will the deal structures look like. For all the hoopla around AI – we remain in the very early innings of a multi-year capital investment boom.

Scope of “AI Opportunity”

The largest and most profitable companies of the market are transitioning their business models from respective focuses of search, social media, ecommerce, online advertising to artificial intelligence (AI) and high-performance computing. The companies view the pursuit of superintelligence as an existential threat to their businesses. One estimate suggests capital investment on hyperscale data centers in the United States will approach $1.8 trillion between now and 2030.

The scope of this investment rivals the two greatest mobilizations of capital in U.S. history: the country’s spending on World War II and the construction of the nation’s railroad system. This is not a critique or judgement on the investments, it is simply an observation of fact. The scope of these projects is literally historic.

As value investors, technology has never been our core focus. Valuations are typically too high, competitive threats are significant, and short product life cycles run counter to many of our long-term principles. As technology moves from the internet to the physical world, we are finding the greatest opportunities right in our backyard. Energy, land, water and other commodities are now vital to the success of the largest companies in the world yet remain wildly underfollowed and under owned by most investors.

Capital Scarcity

$41 TRILLION in national debt. It has been some time since we shared the link to the US debt clock (www.usdebtclock.org). Regrettably, the issues that concern us have not abated and in fact have accelerated. On the other side of compounding, unfortunately it appears the global debt situation has reached escape velocity. Perpetual deficit spending (approximately $2 trillion annually) and incremental interest expense, exacerbated by higher interest rates, make this an accelerating problem.

A consequence of this AI revolution has led the most profitable companies in the market to pivot from high margin, cash generative businesses, to companies making heavy capital investment, often exceeding cash flows, where companies are taking on debt and leverage to finance the investments.

The magnitude of cumulative capital investment triggers competition for capital, likely another vector driving interest rates higher.

A Word on Bitcoin – Right on Schedule

Bitcoin and “crypto” seem to have lost the fancy of mainstream media and pundits. That probably is a good thing, but likely won’t last. Remarkably bitcoin was up over 40% during the 3rd quarter, still down for the year, but a remarkable bounce off its lows.

As we discussed above, with $41 trillion of debt and perpetual deficit spending, one would be wise to own hard, tangible assets to escape the debasement of conventional money. We continue to believe that bitcoin, a decentralized, finite supply money, has a role in an investor’s portfolio.

We regularly focus on the demand side of the value equation. Bitcoin’s fixed issuance protocol and finite supply make sense in a world of debased currencies., Think digital gold. There is an equally compelling explanation of value from the supply side. The economics of validating transactions and maintaining the network is integral to the ecosystem. For a full breakdown and explanation, we encourage you to read the attached white paper published by Horizon Kinetics. We are extremely bullish on Bitcoin’s prospects and expect higher prices over the next 12-18 months. Bitcoin is not dead, it’s right on schedule.

What We Are Looking For

We remain vigilant to overall market risks, primarily valuations and debt and leverage levels. Political and geopolitical uncertainties also weigh on us, keeping abreast of information and disinformation is a challenge. We have constructed a unique portfolio of companies, each with a compelling investment thesis and the potential for significantly higher valuations in the future. Collectively these businesses also have unique attributes that should allow them to endure inflationary pressures, if not thrive.

We believe our investments have the ability to deliver strong annualized returns, equally important is the long-duration nature of the assets and businesses we own. The ability to compound uninterrupted by trading and taxes is key to building true wealth.

We and our families are the largest investor group at Mad River. We are genuinely excited about the potential of our current investments and the broader opportunity set for our strategy. Thank you for partnering with us. We welcome any questions and look forward to speaking with you soon.

Best regards,

Rick Silver & Josh Stewart

Important Disclosure on Model Performance: For the purpose of presenting historical performance information, we reference and present the performance of our Model. While limitations exist with models, we believe our Model offers a reasonable assessment of the typical performance of our historical investment selections for clients. Our Model is based on a taxable portfolio investing since the inception of the investment strategy in March 1999. The Model is presented net of all fees (adjusted to the highest annual fee charged to clients), brokerage expenses, and includes the reinvestment of dividends and interest. The Model generally reflects the performance of portfolios under management since the strategy’s inception in 1999. Client performance will deviate from the Model due to, among other reasons, the starting point of a client relationship; client guidelines, circumstances, and directives; the size of a portfolio and its relative costs; additions and withdrawals of funds; the timing and historical position sizing and concentration of investments; and the account type and its ability to participate in certain investments. During this period there were no strategies employed to obtain the results portrayed other than those implemented for clients pursuant to the Model and disclosed in our Form ADV. Please carefully review our Form ADV for further information. We encourage and strongly recommend that you discuss with us the application, correlation, and significance of the Model’s performance to our client’s historical returns.

Important Disclosure on Benchmark Comparison: The S&P Composite is regarded as a gauge of the US equity market. This index includes a representative sample of 500 leading companies in leading industries of the US economy. Although the S&P 500 focuses on the large-cap segment of the market, we believe it serves as a reasonable proxy for the US market. Nonetheless, the use of the S&P Composite as a comparison may not be appropriate for a variety of reasons including, but not limited to, Model and client account(s) being more concentrated; volatile; holding cash, fixed income investments, and/or option contracts; being short securities; or the average capitalization of companies comprising the Index not correlating with the capitalization of the companies comprising the Model.

Important General Investing Disclosure: Inherent in any investment is the potential for loss of capital, past performance is not indicative of future results, and the value of investments and the income derived from investments may increase or decrease. It is not our intention to state, indicate or imply that future investment results will be profitable or equal past results. The information presented is meant to form the basis of a discussion with us and is subject to further clarification and explanation during discussions with us. This information may not be duplicated, redistributed, or communicated to others without our consent. This is not an offer or solicitation to any person in any jurisdiction in which such an action is not authorized or to any person to whom it would be unlawful to make such an offer or solicitation. We do not provide tax or legal advice to our clients, and you are strongly urged to consult a tax or legal advisor regarding any potential investment strategy.

This communication may include opinions and forward-looking statements. All statements other than statements of historical fact are opinions and/or forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the beliefs and expectations discussed are reasonable, we can give no assurance that such beliefs and expectations will prove to be correct. All expressions of opinion are subject to change. You are cautioned not to place undue reliance on these forward-looking statements. Any dated information is published as of its date only. Dated and forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update publicly or revise any dated or forward-looking statements. Investment process, strategies, philosophies, portfolio composition and allocations, security selection criteria and other parameters are current as of the date indicated and are subject to change without prior notice. 1/2026