While most of the energy sector is dominated by large-cap oil stocks like behemoth Exxon Mobil (XOM) or small-fry wildcatters just getting started, the truth is that firms in the middle could be some of the sectors best bets.
Midcaps — or firms with market caps between $2 billion and $10 billion — could be the sweet spot for energy investors. That’s because midcaps provide the right mixture of attributes for almost all market situations. These stocks typically enjoy strong cash flows, stable business models and less volatility than smaller equities. Plus, midcaps are just small enough to grow faster than their larger counterparts, yet offer equally strong dividend potential.
Those facts have actually helped midcap stocks outperform both large and small-caps over the longer term — by almost 7 percentage points when it comes to mid- vs. small-caps over the last ten years. For energy investors, that trend has held true as well.
So 2014, the choice is clear — owning midcaps could provide the necessary boost that a portfolio needs. Here are five of the best energy midcap stocks to buy now.