10 Small-Cap Energy Stocks with Strong Returns
In this piece, we will take a look at ten small-cap energy stocks with strong returns. If you want to skip our overview of small cap investing and the energy sector, then you can take a look at the 5 Small-Cap Energy Stocks with Strong Returns.
When it comes to trading stocks, there are several sectors that an investor can target depending on strategy. Primarily, stocks can be divided between small caps and large caps on the basis of their market capitalization. Stocks with a market capitalization lower than $2 billion are small caps and all others are large caps. Of course, there are other stock categorizations based on market capitalization as well. For instance, within the small cap stock segment, those stocks that have a market value lower than $300 million are called micro cap stocks and those valued lower than $50 million are nano caps. Similarly, stocks valued between $2 billion and $2 billion are mid caps, followed by large caps and mega caps such as Microsoft Corporation (NASDAQ:MSFT) and of course, Apple Inc. (NASDAQ:AAPL).
Continuing with our initial categorization of all stocks into either large cap or small cap allows a deeper look at the merits and demerits of investing in both. Large cap stocks, and particularly the mega caps and well footed oil companies and stocks such as Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX), are preferred and suitable when the economy is in trouble. This is because even though mega oil cap stocks generally trend lower if economic growth is stuttering, their fortress balance sheets provide investors with security in knowing that once the macroeconomic clouds have dissipated, the company will still be there to meet any uptick in demand.
Similarly, small cap stocks tend to fare better when an economy is growing. This is because these companies benefit from broader economic health through larger markets for their products and services. At the same time, a stable economy means that small cap stocks and businesses can meet their payroll, investor, and debt obligations - all three of which are broader and lead indicators of a company's financial stability.
Switching gears, the oil industry is entering 2024 on a rather tepid note. The start of 2023 saw a lot of optimism all around as investors expected global economies to continue a post coronavirus recovery. Yet, after touching record high revenue levels in, the oil industry took a breather last year.
2023 was a year of consolidation in the energy industry as mega firms announced historic deals. In October 2023, Exxon got the ball rolling as it announced a bumper $59.5 billion price tag to acquire Pioneer Natural Resources Company (NYSE:PXD) for a price of $253 per share. The Pioneer acquisition is Exxon's biggest such move this millennium, and it will allow the biggest Western oil supermajor to increase its production on America's Permian Basin. Given Exxon's size, it's only natural that a multi billion dollar acquisition catches eyes. Right now, it's the eyes of the Federal Trade Commission (FTC) that are on the deal, with FTC requesting more data at the start of December. Democratic senators have raised concerns about the deal affecting prices that consumers pay for gas, but anti trust experts believe that the FTC could see the merger happen anyway since both Exxon and Pioneer are oil producers instead of marketing companies.
In the energy industry, where there's Exxon there's Chevron and this is also the case for 2023's mega oil deals. Soon after Exxon announced its Pioneer acquisition, Chevron also stepped up to reveal that it will acquire the New York based oil and gas exploration and production firm Hess Corporation (NYSE:HES). With a price tag of $53 billion, the deal is believed to provide Chevron with crucial access to offshore drilling projects in Guyana that have also seen Exxon receive flak for. However, while Exxon's deal benefits from the political stability in America, Guyana is part of the region that has seen increased political volatility as of late. The British military has deployed a warship to Guyana, and Venezuela's new president is also sending the military to the region due to mega oil discoveries. At the same time, the FTC has also requested Chevron and Hess for more information, so their share prices and geopolitical news should be important factors to watch out for in oil stocks in 2024.
As for Chevron, its CEO Michael Wirth sounded optimistic about the Hess deal in October when he stated:
But I was out in a number of meetings with John Hess, sometimes the larger Hess shareholders, sometimes with larger Chevron shareholders. I would say, in general, people see the long-term value proposition very clearly here. And I think they see it as a combined company that is stronger and one that is set up to be stronger for longer with the ability to really sustain cash distributions to shareholders in a very consistent, predictable and durable fashion long into the future. And so that is, there’s no doubt about that. Some of the questions, on the one side, did you get a high enough price? On the other side, did you pay too much, right?
So there was tension in the [inaudible] in that, to be honest, during the negotiation. It was [inaudible] as we mentioned, this has been going on for some time. And John and I have been looking for a way to do a deal that is actually one that’s good for both sets of shareholders and not easy because it’s a great asset and the market recognizes that value. And so I think you can find nuances from people who either held one of the stocks or the other for certain reasons. And maybe this wasn’t exactly what they expected. But broadly speaking, I would say people see the long-term value creation. They see the transparency to resource depth, to production growth. The fact that you now have [inaudible] with Hess, you’ve got a much more diversified set of assets attached to their portfolio, which derisks any one of those assets.
With these details in mind, let's take a look at some small cap energy stocks with strong returns. The top three stocks with the highest returns in this list are NGL Energy Partners LP (NYSE:NGL), Prairie Operating Co. (NASDAQ:PROP), and Geospace Technologies Corporation (NASDAQ:GEOS).
A close-up shot of a large pipeline pumping crude oil and pipe valves in a petroleum trust.
Our Methodology
To make our list of the small cap stocks with the strongest returns, we ranked all small cap energy stocks (those with a market capitalization lower than $2 billion) with their 12 month share price performance. Out of these, the top ten small cap energy stocks with the highest returns were chosen. The list is not all inclusive by any means.
For these stocks we have also mentioned hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
10 Small-Cap Energy Stocks with Strong Returns
10. North American Construction Group Ltd. (NYSE:NOA)
1-Year Share Price Appreciation: 50.14%
North American Construction Group Ltd. (NYSE:NOA) is a Canadian company headquartered in Acheson, Canada. The firm provides drilling related services to the energy industry. 2023 was a crucial year for the firm as it expanded its presence in Australia and bought a contract miner for a C$395 million price tag.
During last year's third quarter, 11 out of the 910 hedge funds part of Insider Monkey's database had held a stake in North American Construction Group Ltd. (NYSE:NOA). J. Carlo Cannell's Cannell Capital was the firm's biggest hedge fund shareholder as it owned 1.3 million shares that are worth $29.9 million.
Along with Prairie Operating Co. (NASDAQ:PROP), NGL Energy Partners LP (NYSE:NGL), and Geospace Technologies Corporation (NASDAQ:GEOS), North American Construction Group Ltd. (NYSE:NOA) is a top small cap energy stock with high returns.
9. enCore Energy Corp. (NASDAQ:EU)
1-Year Share Price Appreciation: 53.67%
enCore Energy Corp. (NASDAQ:EU) is an American company headquartered in Corpus Christi, Texas. It is a uranium property developer with assets in New Mexico, Utah, and other American states. The firm exited 2023 by conducting a controlled share sale that saw it raise $24.4 million in gross proceeds.
Insider Monkey dug through 910 hedge fund portfolios for their September quarter of 2023 shareholdings and discovered that four had bought enCore Energy Corp. (NASDAQ:EU)'s shares.
8. Overseas Shipholding Group, Inc. (NYSE:OSG)
1-Year Share Price Appreciation: 56.80%
Overseas Shipholding Group, Inc. (NYSE:OSG) is a downstream energy company whose ships transport petroleum products all over the world. The firm scored a win in December 2023 when it was awarded a $400,000 grant to build a carbon capture terminal at Tampa Bay in Florida.
After taking a look at 910 hedge fund holdings for last year's third quarter, Insider Monkey found that 17 were the firm's shareholders. Overseas Shipholding Group, Inc. (NYSE:OSG)'s largest hedge fund investor is Stephen C. Freidheim's Cyrus Capital Partners as it owns $31.2 million worth of shares.
7. Teekay Corporation (NYSE:TK)
1-Year Share Price Appreciation: 70.83%
Teekay Corporation (NYSE:TK) is a global oil shipping company with more than 50 ships in its fleet. The tail end of 2023 turned out to be a crucial period for the firm as it was interested in expanding its vessel fleet after earning a record profit.
Insider Monkey's September quarter of 2023 survey covering 910 hedge funds revealed that 19 had invested in Teekay Corporation (NYSE:TK). Jim Simons' Renaissance Technologies was the firm's biggest shareholder courtesy of its $18.3 million investment.
6. Teekay Tankers Ltd. (NYSE:TNK)
1-Year Share Price Appreciation: 70.83%
Teekay Tankers Ltd. (NYSE:TNK) is a subsidiary of Teekay Corporation. The firm has beaten analyst EPS estimates in three out of its four latest quarters, and it ranks number 8th on our list of the most profitable small cap stocks with notable hedge fund interest.
As of Q3 2023 end, 20 out of the 910 hedge funds covered by Insider Monkey's research had invested in the firm. Teekay Tankers Ltd. (NYSE:TNK)'s largest hedge fund investor is Israel Englander's Millennium Management as it owns $26.6 million worth of shares.
NGL Energy Partners LP (NYSE:NGL), Teekay Tankers Ltd. (NYSE:TNK), Prairie Operating Co. (NASDAQ:PROP), and Geospace Technologies Corporation (NASDAQ:GEOS) are some small cap energy stocks with strong returns.
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Disclosure: None. 10 Small-Cap Energy Stocks with Strong Returns is originally published on Insider Monkey.
