A Cautionary Tale of Viper Energy’s Stock Slide and Strategic Exits

On a rather unremarkable day in November-specifically the 13th, if you must know-the Nemes Rush Group, a fund based in the charmingly flat landscape of Michigan, made a startling announcement. They had decided to completely divest from Viper Energy (VNOM +1.10%), shedding 319,503 shares valued at a staggering $12.18 million. One can only imagine the drama that ensued in their boardroom, possibly involving a PowerPoint presentation featuring far too many pie charts.

What Happened

The details are as crisp as a fresh apple: according to a filing with the Securities and Exchange Commission (SEC), this entire exit happened during the third quarter. The transaction value? A neat $12.18 million, calculated from average prices that could rival the complexity of a Rubik’s Cube.

What Else to Know

Once upon a time, this fund’s stake in VNOM represented a tantalizing 1.33% of their reportable assets under management (AUM)-which, for those not fluent in investment jargon, is just a fancy way of saying the total market value of what they’ve got tucked away in various investments.

Post-exit, here are some of their top holdings:

NASDAQ:AVGO: $55.44 million (5.5% of AUM)
NASDAQ:AAPL: $52.14 million (5.2% of AUM)
NASDAQ:MSFT: $42.41 million (4.2% of AUM)
NASDAQ:GOOGL: $38.28 million (3.8% of AUM)
NASDAQ:NVDA: $37.42 million (3.7% of AUM)

Meanwhile, Viper Energy’s shares languished at $38.48, a disheartening 20% drop over the past year. In contrast, the S&P 500, that ever-reliable benchmark, pranced ahead with an impressive 15.5% gain during the same period. It’s almost as if one were watching a tortoise race against a hare-only to find the hare was, in fact, an Olympic sprinter.

Company Overview

Metric	Value
Revenue (TTM)	$1.19 billion
Net income (TTM)	$243.66 million
Dividend yield	5.5%
Price (as of Monday)	$38.48

Company Snapshot

Viper Energy owns and manages mineral interests in oil and natural gas properties primarily nestled in the Permian Basin and Eagle Ford Shale-names that sound like they belong in a Western movie rather than in a financial report.
The company generates revenue from royalties on hydrocarbon production, which is essentially the fancy term for getting paid for letting someone else dig holes in your backyard.
Functioning as a subsidiary of Diamondback Energy, Viper Energy is essentially the junior partner in this oil escapade.

Viper Energy’s business strategy is a clever little dance that allows it to participate in the lucrative world of oil and gas without having to plunge headfirst into the murky waters of capital expenditures and operational risks. They accumulate mineral rights in prime locations, collect royalties, and hope that the price of oil doesn’t plummet like a lead balloon.

Foolish Take

This recent sell-off is noteworthy not just for the sheer size of the exit but for what it implies about investors’ appetite for the unpredictable rollercoaster that is income-focused energy stocks. Viper Energy isn’t exactly the poster child for high growth; rather, it’s a royalty operation aiming to turn commodity exposure into cold, hard cash-and dividends and buybacks, if they’re lucky. While they’ve been operationally robust, the stock price has recently been something akin to a poorly tuned ukulele.

In the third quarter, Viper managed to churn out over 108,000 barrels of oil equivalent per day, generating a respectable $165 million available for distribution. They returned a commendable 85% of that to shareholders via a combined dividend and buybacks. At recent prices, that translates into a yield over 6%-not too shabby unless you consider the pesky little detail of their reported losses driven by non-cash impairment charges. This suggests more trouble than the standard “my dog ate my homework” excuse.

For a diversified fund, trimming or entirely exiting a position below 2% after a significant decline can be seen as a matter of portfolio hygiene, a strategic tidying up rather than a profound judgment on the underlying fundamentals. And therein lies a lesson for long-term investors: sometimes, the market’s behavior resembles more of a soap opera than a well-crafted narrative.

Glossary

Assets under management (AUM): The total market value of investments managed by a fund or investment firm.

13F reportable assets: Securities that institutional investment managers must disclose quarterly to the SEC if over a certain threshold.

Liquidated: Sold off an entire investment position, reducing holdings to zero.

Dividend yield: Annual dividends paid by a company divided by its share price, shown as a percentage.

Trailing twelve months (TTM): Financial data covering the most recent 12 consecutive months.

Mineral interests: Ownership rights to minerals (like oil or gas) beneath land, often generating royalties.

Royalties: Payments made to mineral rights owners based on production or revenue from resource extraction.

Upstream production: The exploration and extraction phase of oil and gas operations, before refining or distribution.

Capital expenditures: Funds used by a company to acquire or upgrade physical assets such as property or equipment.

Operational risks: Potential losses resulting from failed internal processes, systems, or external events.

And there you have it-a glimpse into the chaotic world of market maneuvers wrapped in the enigma of energy stocks. Who would have thought that finance could be this perplexing? 🤔

2025-12-29 23:02