Investors on the hunt for little-known stocks setting up for big gains can look north: Two mid-cap Canadian energy companies, Crescent Point Energy Corp. (NYSE: CPG) and Ovintiv Inc. (NYSE: OVV) , gapped higher in early April. 

Both stocks followed the same trajectory as other U.S. and Canadian oil-and-gas companies after OPEC+ said it would slash production by 1.65 million barrels a day. That news sent the entire sector higher, after wobbling in the early months of this year, while tech and communications services rotated back into leadership. 

One of the bigger producers and explorers from up north, Canadian Natural Resources Ltd. (NYSE: CNQ), also gapped higher for the week, and held those gains, as did Crescent Point and Ovintiv. 

Crescent Point has a market capitalization of $4.2 billion, and Ovintiv’s market cap is $9.5 billion, putting them both in mid-cap territory. That’s significant, because smaller companies, including mid-cap stocks, frequently post bigger gains during a rally than larger industry peers. 

Mid-Caps Offer Opportunity

There are some reasons why mid-caps, in particular, may be fertile ground for investors. They typically have sparse analyst coverage and institutional ownership, relative to large companies, which can result in mispricings that can benefit retail investors. For example, by identifying stocks with strong upward or downward trends, retail investors can capitalize on events the broad market largely overlooks. 

Similarly, mid-cap companies undergoing significant corporate events including mergers, and acquisitions may escape the attention of most big investors, who tilt toward the greater liquidity and predictability of large-cap names. 

Growth Through Acquisition

Crescent Point and Ovintiv have another element in common, and one that’s common in the energy industry: They are both in the process of acquiring production assets from other companies.

Within the highly competitive oil and gas industry, companies frequently seek ways to increase profitability and growth, and acquiring assets allows them to accomplish that.

Crescent Point  

Crescent Point Energy shares gapped up on April 3 in heavier-than-normal volume. The stock’s chart shows a consolidation that began in June of last year. The short-term 10-day moving average turned sharply higher following the gap-up, which could be a signal of a rally that’s ready to continue. 

In addition to the OPEC+ cuts, Crescent Point got a boost in late March on news that it would acquire Spartan Delta Corp.’s oil-and-gas assets in Alberta for $1.24 billion. 

Like other oil explorers and producers, both large and small, Crescent Point’s revenue growth decelerated in the past two quarters. You can see the same revenue pattern with Chevron Corp. (NYSE: CVX) and Exxon Mobil Corp. (NYSE: XOM), for example. A decline in global prices was a key driver. 

Crescent Point continues to post very strong, albeit decelerating, earnings growth. MarketBeat earnings data for Crescent Point show the company beating both sales and earnings views in the past three quarters. 

The company pays a dividend yield of 3.91%.

Ovintiv

Calgary-based Ovintiv specializes in the exploration, development, and production of oil and natural gas resources, with operations in the Permian Basin and Eagle Ford in Texas, and Montney, and Duvernay in Canada.  

In addition to its oil and gas exploration and production activities, Ovintiv also operates transportation, storage, and marketing of oil and gas products.

It also pays a dividend, with a yield of 2.56%.

The company is acquiring Permian Basin leasehold interests and other assets currently owned jointly by Black Swan Oil & Gas, PetroLegacy Energy and Piedra Resources. The deal is valued at around $4.275 billion.

Ovintiv’s chart shows a correction that has been forming since June, the same time the broader sector began declining in price.

Both revenue and earnings have been declining. MarketBeat earnings data show the company trouncing revenue views in the past two quarters but missing on the bottom line. 

The trend of deceleration is expected to reverse, though, as analysts are eyeing earnings growth of 29% this year, and another 10% expected in 2024. Here, too, as shorter-term moving averages turn higher and cross over longer-term lines, and earnings growth improves, there could be opportunity ahead for investors who track this stock.