While most of the energy sector is dominated by large-cap oil stocks like behemoth Chevron (CVX) or small-fry wildcatters just getting started, the truth is that firms in the middle could be some of the sector’s best bets.
Midcaps — firms with market caps between $2 billion and $10 billion — could be the sweet spot for energy investors. That’s because midcaps offer the best attributes of large- and small-cap stocks. Typically, midcaps benefit from strong cash flows, stable business models and less volatility than smaller equities. There’s plenty of strong dividend potential as well. On the other hand, midcaps are just small enough to grow faster than their larger counterparts.
This combination of factors has helped midcap stocks beat both large and small-caps in the returns category over the longer term. And in the energy sector, that outperformance has held true as well.
For investors, focusing on the stocks right in the middle could be the key to long-term outperformance and portfolio gains. Here are five midcap energy stocks to buy now: