This week’s events show it’s becoming a bad time to be a generalist. Buyers of large-cap energy stocks have had their wallets handed to them over the last couple of weeks.
But that might signal an opportunity in the making—a return to one of the resource sector’s most profitable investing strategies. Small cap stocks. Nimble development companies that could give investors the perfect way to play several of the biggest emerging themes in energy.
That includes many of the opportunities we’ve been talking about in these pages. India’s coal demand hitting super-critical levels. American exports of natural gas liquids taking the petro-chemical world by storm. The emerging profitability of light oil plays outside of North America, in far-flung places like Africa and Asia.
Up until now, there’s been little incentive for energy investors to look at the small-cap end of the stock spectrum. Over the last several months, stock buyers have done just fine with large cap companies—which had been offering the most stable ways to play energy markets.
Until all that changed a few weeks ago.
Just look at a stock like Exxon (NYSE: XOM). The firm had been riding along with the general updraft in major stock markets—which saw U.S. indices tally record gains of up to 30% during 2013. A lift that helped Exxon gain an eye-catching 20% during the fourth quarter alone.
But Monday’s market correction…