AIA Free Weekly Email 8.13.26

Horizon Kinetics Q2 2026 Commentary

These guys are some deep thinkers. Even though Murray Stahl has passed, I am happy to see that the deep thinking is still present.

When things are this skewed, one must wonder if a reversion to the mean is coming sooner rather than later. I suspect that energy will not remain at just three percent of the S&P.

Comments on Landbridge, a company that I own via my holdings in FRMO Corp.

LandBridge embodies just the sort of rare hard assets, profitability, and business persistence that we seek. It now has over 300,000 acres of strategically assembled surface acres in the Delaware Basin of Texas. It is from that land position that its current and future revenues will emanate. Its core business for the time being is leasing its land for water transportation, treatment, and remediation, which largely manifests as a royalty-like fee based on the volumes of water that are either piped across its acreage or stored in its subsurface pore space.

Moreover, the company’s water handling and storage contracts, which typically run for 10 years, contain inflation escalators. Based on typical inflation indices such as the CPI, one can already anticipate 12% or greater revenue growth, which requires no capital spending by Landbridge. Then, as demand for pore space increases in future years, new contracts are likely to be priced higher than the current roughly $0.11 per barrel, which would add to the revenue growth rate.

Looking ahead, LandBridge was the first company to introduce the concept of “powered land” as a strategy to facilitate the development of private power generation and transmission, and ultimately large-scale data centers. LandBridge’s contiguous surface land has the latent potential to capture developments from the data center itself, related roads, power lines, wind and solar, carbon capture, and water, all of which generate recurring, high-margin “royalty-like” revenue streams. It’s important to note that because LandBridge acreage lies above a significant aquifer, the company can supply the water necessary for oil and gas drillers. Aquifer-based source water is priced in the $1/barrel range, though some of the gross revenue is shared with water handling companies that extract it from LandBridge’s acreage. Again, LandBridge takes a royalty-like interest in it.

This is an example of the type of company I am looking to add to my new “Permanent Portfolio”.

I have discussed this a few times in the past. I am looking to create a portfolio of scarce, non-replaceable assets. Management like Landbridge’s that knows what it owns and how to maximize the optionality of its assets is an example what I am seeking.

More to come on this.

One way many of these land banks will monetize their land is by hosting power plant projects. These can be renewable projects and steam plants (gas turbine, coal, or nuclear). A side benefit for many of these land companies is that they have large water resources they can control and use as cooling water for the power plants and data centers that will be hosted.

Robotti Value Investors Q2 2026 Letter to Investors

The stock market has a long history of obsessions, and currently it is artificial intelligence. In the span of a few years, AI has gone from a research curiosity to a fundamental driver of the market: capital spending measured in the hundreds of billions, valuations that embed decades of flawless execution, and a daily news cycle in which every announcement, new model, new chip, or new data center can move hundreds of billions of dollars of market value. Over time, markets have experienced euphorias driven by railroads, radio, conglomerates, the internet, and housing. Each was built on a real and durable change in the world. Each also taught the same lesson that the significance of a technology and the returns to its most celebrated stocks are two very different things.

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For investors, this is where it gets interesting. The market has bid the recognized beneficiaries of AI to prices that leave little room for disappointment, while the physical economy that must be built to realize any version of the AI future remains largely ignored or valued, in many cases, as though the last decade's indifference will simply continue. One does not need to predict which model wins, or whether today's spending proves too much or too little, to observe that the demand for machines, materials, energy, and infrastructure is rising, straining supply that cannot quickly respond. That asymmetry, where enthusiasm concentrates in one place while necessity accumulates in another, is precisely the kind of gap between narrative and reality where we have always done our best work. It is also the backdrop for everything that follows in this letter.

If you believe in investing in value or sectors that are out of favor, then Bob Robotti is your guy.

Circle Of Competence

As many of you know, our team at Smead Capital Management has studied the thinking and investment careers of Charlie Munger and Warren Buffett. In today’s Go-Go artificial intelligence-dominated stock market, we’d like to walk you through the concept of the Circle of Competence.

Charlie Munger’s concept of the circle of competence is a mental model that states you must know the exact boundaries of what you understand and stay within them to avoid costly mistakes. It is not about how large your circle is, but how well you define its edges.

Smead Capital Management has some wise words on the circle of competence investors should cultivate, a concept championed by Charlie Munger.

Nothing stops this train

We are entering the final stages of the US empire. Many empires in the past succumbed to too much debt and military overreach. This is what is happening to the US.

People often ask me in interviews if I am bullish on precious metals. Yes, the course is set, and this will continue until we get a crisis. The establishment will try to pull rabbits out of the hat to preserve the status quo. However, no matter what they do, decline is inevitable. Expect more money printing and the FED to become the buyer of last resort for US Treasury securities.

You will not vote your way out of this decline. Prepare accordingly.

John Polomny Says Copper Could Hit $12 as the AI Bubble Bursts

Steve Barton interviewed me for his channel “In It To Win It”.

That is all for this week.

John Polomny

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