Key points
- WTI crude oil has risen more than 20% since the beginning of the year, driven by tensions in the Middle East, the war between Ukraine and Russia and economic uncertainties.
- Several small-cap energy stocks saw notable price and volume gains on Friday.
- Investors should approach small-cap energy stocks with caution, considering their speculative nature and historical volatility despite short-term gains.
- 5 stocks we like most about Indonesia Energy
WTI Crude Oil continued to rise as tensions rise in the Middle East due to ongoing developments and significant uncertainties. Year to date, crude oil futures have risen more than 20%, rising from nearly $70 to just over $85 at Friday’s close.
While the overall market, namely the SPDR S&P 500 ETF Trust NYSEARCA: SPY, retreated nearly 3% from its all-time high and 52-week high near $524, commodities rose amid economic and geopolitical concerns. Gold and silver rose, with the price of gold reaching new all-time highs.
As oil prices continue to rise and consolidate near recent highs and the situation continues to develop in the Middle East, several small-cap stocks in the energy sector posted significant price and volume gains on Friday. Could these stocks be hidden gems set to benefit from rising oil prices, or are they simply benefiting from the hype and should be avoided as investments altogether? Let’s take a closer look.
5 Small-Cap Energy Stocks Getting a Bid
1. Indonesia Energy Corp.
Indonesia Energy NYSE: INDONE is a microcap oil and gas exploration and production company. The stock has a market cap of $50 million and an average volume of 140,393 shares. That light volume and low float make the stock extremely susceptible to increased volatility. The stock saw a notable increase in volume and price on Friday, with nearly 60 million shares traded and up just over 80%. Despite the recent surge, its relative strength index (RSI) is already in overbought territory at 80.38, suggesting the stock is overvalued. The stock also has limited institutional ownership, just 0.51%, and a history of extreme drops following rapid price increases.
2. Houston American Energy Corp.
Houston American Energy NYSE: USA is an independent oil and gas company that explores, develops and produces natural gas, crude oil and condensate. HUAS has a market cap of $23 million and an average volume of just 338,429 shares. Along with INDO, HUSA rose 35% on high volume on Friday. However, over a longer time frame, the stock has a history of downtrend and fails to maintain a higher base. HUSA has institutional ownership of 12.18% and a float limited to just 9.2 Million shares, making the stock an extremely speculative and high-risk option.
3. Trio Petroleum Corp.
Trio Petrolio NYSE: TPET has seen a notable increase in both volume and price lately, with shares rising more than 300% in the month. Headquartered in the United States, TPET operates as an oil and gas exploration and development company. The company has a micro-cap of $19 million and only 36 million shares outstanding, making the small-cap energy name largely speculative. Despite the recent rally, the stock remains in a broader downtrend, down significantly from its 52-week high.
4. Imperial Petroleum Inc.
Imperial Oil NASDAQ: IMP It has a market capitalization of $61 million and operates as an international shipping service for oil producers, refiners and commodity traders. The stock has a history of rising relative to other small-cap energy stocks when a broader theme has been present. Despite rising volumes on Friday, IMPP failed to match the performance of the names mentioned above and ended the day down 4%. However, unlike the stocks above, IMPP has significant institutional ownership, with an ownership percentage of 94.44%.
5. CN Energy Group Inc.
CN Energia Group NASDAQ: CNEY There was an increase in volumes on Friday too, with the stock trading over 3 million shares compared to the average volume of just 67,751. However, the stock only ended the day up about 12%. The company, which primarily produces and supplies wood-based activated charcoal in China, has just 2.3 million shares outstanding and a market capitalization of just $2.7 million, making it an extremely speculative option and risky.
Is it worth investing in small-cap energy stocks?
While several small-cap energy stocks have taken a chance in the near term due to rising crude oil prices and the current situation in the Middle East, investors should understand the nature and risk profile of these companies as well as the their performance history and volatility extremes before making any investment decisions.
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