Market Overview

Big Oil Is Slipping, But Small Caps Are Surging

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Testifying before Congress in 2011, Rex Tillerson, the Chief Executive Officer of Exxon Mobil (NYSE: XOM), the biggest oil company in the world, said that based on demand, a barrel of crude should be going for around $60-70. It was around $90-100 at that time. Speculators were driving up the price of oil.

Due to the forces of market supply and demand inevitably making its weight felt, the price of oil is falling. Along with it, so is share price for major oil firms like Exxon Mobil, Occidental Petroleum, and Suncor Energy.

But the stocks for small cap oil and natural gas firms such as Octagon 88 Resources (OTC: OCTX) and Americas Petrogas (OTC: APEOF) are doing well.

Due to the bull market, the potential for major oil firms like Exxon Mobil, Occidental Petroleum, and Suncor Energy, among others, has been pretty much reached. But there still is much play left in Americas Petrogras, Octagon 88, and other small caps. Each has very promising holdings and tremendous upside that is not yet fully valued.

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When there is a bull market, there is an institutional bias towards larger stocks. The biggest mutual funds are index funds. So if a small cap oil firm is now a member of the S&P's 500 Index, it will not benefit from the investment capital that flows into the biggest mutual fund in the world.

That leaves out Octagon 88 and Americas Petrogas, which is where the opportunity for investors enters.

The market undervalues these companies. The great majority of money flows into the bigger companies. As a result, Americas Petrogas, Octagon 88, and others small caps have a great deal of appeal.

This is starting to be discovered by the investment community, which was inevitable.

Over the past month, Americas Petrogas is up more than 25 percent. For the same period, Octagon 88 has risen about 10 percent. During that time span, the S&P's 500 Index is up less than 4 percent. Based on the holdings of each, Octagon 88 and Americas Petrogas should continue to lead the way for small cap oil and natural gas stocks.

Posted-In: occidental petroleumLong Ideas Small Cap Analysis Technicals Commodities Economics Markets Trading Ideas Best of Benzinga

 

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