Friday, January 9, 2009

Hugoton Royalty Trust - HGT

With an 80% net profit interest in XTO Energy (XTO) projects that span three states, including the prolific Anadarko basin, Hugoton Royalty Trust (HGT) provides good exposure to the natural gas sector, while at the same time giving the investor significant royalty income.

The price of HGT stock is mostly influenced by the long-term natural gas price, and as such has suffered in recent months falling to a 52 week low of $14. HGT currently trades at $16.98, a far cry from the 52 week high of $37.86, which I believe presents real value once natural gas prices resume an upward trend.

While I fully expect renewable and green technologies to play an increasing role in energy production in the future, natural gas will remain a major source of energy in the intermediate term. Hugoton Royalty Trust (HGT) currently trades at a trailing P/E of 5.98 and I anticipate a 12-month price target of $20 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author held shares in Hugoton Royalty Trust (HGT).

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