Small Cap stocks have been lagging behind Large Cap stocks this year as A.I.-oriented companies like Nvidia and Microsoft have been driving the market. However, Small Cap stocks have historically outperformed and provided diversification benefits. Small Cap stocks have seen faster sales growth compared to Large Cap stocks since 1995, and many of these companies are focused on the U.S. market, which shields them from currency volatility. With inflation and profit margin pressures affecting multinational companies, Small Cap stocks could offer a valuable opportunity for investors.
One such opportunity is Civitas Resources (CIVI), a relatively unknown company that has positioned itself as the largest pure-play oil & gas producer in Colorado. With operations in the Permian Basin and the Denver-Julesburg Basin, Civitas has low expenses and a diverse sales volume composed of oil, gas, and natural gas liquids. Despite its strong fundamentals, the stock has been stagnant in recent years, presenting an attractive buying opportunity. With an earnings multiple of less than 6 times NTM adjusted EPS expectations and a high dividend yield of over 8%, Civitas Resources could be a bargain in the oil patch.
In a market dominated by A.I.-oriented Large Cap stocks, the undervalued Small Cap stocks offer better growth potential and diversification benefits. Small Cap stocks have historically shown faster sales growth and can provide exposure to U.S.-centric companies, which are less affected by currency volatility. With inflation and profit margin pressures impacting multinational companies, investors may find value in Small Cap stocks such as Civitas Resources, which offers a unique opportunity in the oil and gas sector. With low expenses and a high dividend yield, Civitas Resources could be a hidden gem for investors looking to diversify their portfolios.
Investors should consider adding Small Cap stocks to their portfolios despite the recent performance gap between Small Cap and Large Cap stocks. Small Cap stocks have historically outperformed and offer diversification benefits, particularly in the current market environment. Companies like Civitas Resources provide opportunities for growth and income, with strong fundamentals and attractive valuations. By including Small Cap stocks like Civitas Resources in their portfolios, investors can potentially enhance their returns and mitigate risk in their investment strategies.
While Large Cap stocks have been driving the market higher, Small Cap stocks have been overlooked by investors despite their strong growth potential. Companies like Civitas Resources offer opportunities for value investors seeking undervalued assets in the oil and gas sector. With low expenses, high dividend yields, and exposure to U.S.-centric markets, Small Cap stocks can provide a unique investment opportunity for investors looking to diversify their portfolios and capitalize on growth potential. By considering Small Cap stocks like Civitas Resources, investors can position themselves for long-term success in the stock market.