“Big Oil” stocks such as ExxonMobil (NYSE: XOM) and ConocoPhillips (NYSE: COP) have done very well in the bull market. The future demand for energy is expected to increase greatly, and these companies are well situated to profit. Also positioned to gain from the world’s expanding need for oil and natural gas are small cap firms such as Octagon 88 (OTC: OCTX) and Americas Petrogas (OTC: APEOF).
Due to the size, Big Oil stocks will be more attractive to many.
Institutional investors prefer stocks with large market capitalizations. It makes it easy to buy massive amounts of shares without driving up the prices. Many times Big Oil pays big dividends. For mutual funds that can only own stock that provide income, that is a requirement. The research departments also prefer to spend time on larger entities as more can be made from future dealings.
That is where the opportunity lies with small cap oil such as Octagon 88 and Americas Petrogas.
What institutional investors overlook is what individual investors can earn profits. If the small cap is a company with valuable holdings not fully priced into the stock, like Americas Petrogas and Octagon 88, eventually that will be recognized by the market. As the global need for energy increases, so will the allure of small cap oil and natural gas stocks like Octagon 88 and Americas Petrogas that are not fully valued by the market.
When that happens, the stock price will rise.
The is the whole foundation of value investing. Companies with share prices that do not reflect the value of the assets are appealing for the long term. Warren Buffett is probably the best known value investor. He has bought many small cap companies; and done quite well as he is worth over $50 billion. Buffett claimed in an interview in Fortune magazine that his favorite investment of all time is See’s Candies, a small cap business.