Let’s face facts. When most investors gravitate towards the energy sector, they tend to focus on the big boys. You know, the Exxon Mobils (XOM) and Chevrons (CVX) of the world. After all, the major integrated behemoths are responsible for most of the world’s oil and natural gas production.
However, “most” doesn’t equal “all.”
There are plenty of other producers out there that are churning out steady and reliable energy production — with some of the best being desirably small. Truth is, small-cap E&P firms can mean just as much for your portfolio as their larger cousins.
In fact, adding a swath of them could very well lead to bigger returns over the long haul.
These junior and smaller exploration energy companies serve as some of main providers of new hydrocarbon supplies by finding new deposits and bring them into production. Major producers see these junior discoverer corporations as a way to add to their overall reserves, and often partner with or simply buy these mid-tier producers (sometimes at a high premium). And it only takes one gusher to turn a small company into a superstar and send its stock price rising.
Here are five of the best small-cap energy picks for your portfolio.