What would you do if you had a stock that returned 20 times your initial investment over a span of two decades? Would you sell some or all and lock in the huge gain?

That would seem reasonable. After all, the stock may have run its course.

Then again, you might want to hang onto it, especially in one particular case.

In the past 20 years, Range Resources (NYSE: RRC), a Fort Worth, Texas,-based producer of oil and natural gas, has gained more than 1,900% — about 16% a year. That means $5,000 invested on May 2, 1991, would be worth about $100,000 now.

It’s one reason Range Resources is my favorite investment of the past two decades. Another is that it still has room to run.

Natural gas is by far Range Resources’ leading product. Range is considered by many analysts to be the best play on the premier natural gas source in North America — the Marcellus Shale region of the east coast.

Although natural gas prices have been low for years due to oversupply, they’re set for a big rebound as the United States seeks alternatives to oil. Natural gas could be an excellent alternative because it’s much cheaper and cleaner. There could certainly be strong demand for it domestically because more than half of U.S. homes are heated with natural gas.

Indeed, U.S. demand may rise significantly as more households switch to gas to save money. Then the fuel may gradually become more popular for other uses, such as  natural gas-powered vehicles. Honda Motor Co. (NYSE: HMC), for example, has been making a Civic that runs on compressed natural gas for a couple years now. General Motors (NYSE: GM) has offered a lineup of natural gas trucks and vans for more than a year already.

There’s very high demand in Asia and other developing countries, which use a lot of natural gas to fuel economic expansion. The United States could become a major exporter to emerging markets, thanks to its oversupply and large production capacity.

Range is the No. 1 play on the nascent rally in natural gas because it dominates the Marcellus area, where it holds 800,000 high-grade acres (mostly in Pennsylvania) under long-term, low-cost leases. It also has large, productive natural gas fields in southwestern Virginia, the Permian Basin of western Texas and other areas. Thus, production and reserves should grow considerably for the next decade, at least.

The first quarter of 2011 provided a good sense of Range’s production ability. Output averaged 545 million cubic feet equivalent per day, as management predicted. Liquid volume rose 29% year-over-year to 19 million barrels of oil equivalent per day, largely because of a 55% increase in liquefied natural gas production. Reserves at the end of 2010 were 4.4 trillion cubic feet equivalent, a 42% increase from 2009.

These results are only the latest example of Range’s consistency. The company has grown production for 32 consecutive quarters and will probably continue the streak for some time. It regularly adds new wells, like the 15 it brought on line in the Marcellus Shale in the first quarter. Newly-constructed processing facilities in southwestern Pennsylvania are expected to begin operating any time now.

My analysis, which  is based on trailing 12-month earnings of $0.61 a share, excluding a non-recurring loss of $0.12 a share, suggests a stock value of $86 a share — more than 65% higher than the current price of $52. The analysis also incorporates analysts’ forecasts for earnings growth of 14% a year for five years (followed by 8% annually thereafter just to be conservative).

To hit $86 by 2016, the stock would only need to grow 10.5% annually, a full 5.5% slower than its annual growth rate for the past 20 years. So $86 seems very doable, especially if natural gas rallies strongly as I suspect.

Action to Take –> Buy shares of Range Resources now, before natural gas becomes the next big thing. When it does, you’ll already be positioned for enviable returns.

Be mindful of the risks, though. For Range, the biggest one is if natural gas prices remain in a slump or recede even further, hindering new projects and depressing profits. Increased regulation stemming from environmental concerns about natural gas extraction methods could adversely affect profits, too.

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