February 11, 2002; Thar's Gold in Them Royalty Trusts

The recent up tick in gold price could be positive for energy.  Gold once was an indicator of a currency's real value. 

Energy stocks can adjust for changes in currency value.  Canadian energy stocks in our coverage seem to adjust for declines in the Canadian dollar. 

Natural gas is a real asset that should hold its value if the dollar changes.  At the same time our base case is a more optimistic one that natural gas will be a valuable contributor to economic growth.  The royalty trusts in our coverage are among the purest means for owning natural gas.

Our royalty trust Buy recommendation is San Juan Basin Royalty Trust (SJT).  It may still be early as high inventories weigh on natural gas price.  Also investors who checked our tables last week might have noticed a low distribution projected for April on the basis of index price for the San Juan Basin in February.  We may be too pessimistic because the $1.81 index price from one source was $0.26 per mmbtu lower than the daily price for the same location on the last day of the month from another source.  Index prices are only a rough advance indicator to what the trust reports for its distribution. 

Though stock prices fluctuate, low prices can be fleeting.  Investors had to be watching minute-by-minute to catch any SJT units below $9 even though the 52-week low is listed at $8.53.