Oilfeeds.com

Steeper declines in stock prices of buy recommendations Gazprom (OGZPY.PK) and Lukoil (LUKOY.PK) since Russian troops entered Georgia have opened an opportunity for portfolio rebalancing. In other words, buy more shares of the two recommended

Russian stocks to restore their weightings to desired long-term levels. Admittedly that takes courage because political risk is particularly hard to assess and changes in stock price trends are hard to anticipate. We believe some risk is worth taking because there are no other large cap opportunities with so much resource value and such low stock price as measured by McDep Ratios.

Buy-recommended Hugoton Royalty Trust (HGT), with estimated net present value [NPV] of $42 a unit, offers natural gas resource value with income. On May 13, we raised NPV from $34 on the basis of a long-term natural gas price assumption of $14 a million btu, up from $11.

The natural gas benchmark index price set at the beginning of the month was $13 in July. Taking account of the two-month lag in declaring distributions, the July index price indicates a record payment of $0.42 a unit to be declared in September. Alas, natural gas price declined sharply to a $9 index for August, which points to $0.26 a unit distribution in October. Futures prices on August 18 are the basis for our estimate of distributions in the first half of next year. With the U.S. in a continuing credit crisis, investors in a strong financial position can be the winners buying units of a sound trust, like HGT, sold by weak, highly leveraged investors.