Finance

How Natural Gas and Middle-Market Lending Stocks Could Outperform the Overvalued Market

High stock valuations prompt analysts to identify value in EQT, Expand Energy, and Ares Capital, despite market concerns.

byAndres Castro

November 16, 2025, 6:40 AM

Close-up of eyeglasses reflecting a bright orange stock market chart showing volatility.

A stock market chart reflects in eyeglasses, symbolizing analysis. By MDL.

Executive Summary

The U.S. stock market is currently experiencing historically high valuations, with the Shiller price-to-earnings ratio and the “Buffett indicator” reaching near-record levels.

EQT Corporation and Expand Energy are identified as potential value opportunities within the natural gas sector, driven by increasing global demand for LNG and operational efficiencies.

Ares Capital Corporation, a business development company specializing in middle-market lending, is highlighted as a value opportunity, trading at book value with a 9.5% dividend yield despite recent credit risk concerns.

The Story So Far

The U.S. stock market is currently at historically high valuations, prompting investors to seek value opportunities. This search is driven by specific sectoral demands, such as the global shift towards cleaner energy sources boosting natural gas producers like EQT Corporation and Expand Energy, and the post-2008 financial crisis regulatory environment that has created a vital niche for business development companies like Ares Capital Corporation to finance middle-market companies.

Why This Matters

Despite the U.S. stock market reaching historically high valuations, signaling potential risks, specific sectors and companies are identified as offering value opportunities. Natural gas producers like EQT and Expand Energy are poised for growth due to increasing global demand for cleaner energy and operational efficiencies. Concurrently, Ares Capital Corporation presents a unique opportunity in the middle-market lending space, filling a crucial role as traditional banks face tighter regulations and offering an attractive dividend yield.

Who Thinks What?

Financial indicators such as the Shiller price-to-earnings (CAPE) ratio and the “Buffett indicator” suggest the U.S. stock market is currently experiencing historically high valuations, with the “Buffett indicator” surpassing 200%, a level investor Warren Buffett described as “playing with fire.”

Financial analysts identify natural gas producers like EQT Corporation and Expand Energy as positioned for potential value, driven by increasing global demand for natural gas as a cleaner energy source, growing data centers, and an expanding manufacturing sector.

Financial analysts also view Ares Capital Corporation as a potential value opportunity in specialized lending, noting its role in financing middle-market companies and its attractive dividend yield, despite recent investor concerns about credit risk.

The U.S. stock market is currently experiencing historically high valuations, as indicated by the Shiller price-to-earnings (CAPE) ratio and the “Buffett indicator,” which measures the total market value against GDP. Despite these elevated levels, financial analysts have identified EQT Corporation, Expand Energy, and Ares Capital Corporation as companies positioned for potential value, driven by factors such as increasing natural gas demand and specialized lending in the middle market.

Market Valuations Reach Historic Highs

Current stock market valuations are approaching their most expensive levels ever, according to the Shiller price-to-earnings ratio. The “Buffett indicator,” which compares the total value of the U.S. stock market to the nation’s gross domestic product, has surpassed 200%. This level has been described by investor Warren Buffett as “playing with fire.”

Natural Gas Producers Poised for Growth

EQT Corporation, a prominent player in the U.S. natural gas sector, engages in exploration, production, transportation, and sales to various industrial users. The company is expected to benefit from a global shift towards cleaner energy sources, as natural gas produces fewer emissions than coal and oil and provides reliable baseload electricity.

The U.S. is the world’s largest exporter of liquefied natural gas (LNG), shipping 11.9 billion cubic feet per day in 2024, with continued expansion of export terminals. This sustained demand from regions like Europe and Asia, which are replacing coal and seeking energy independence, contributes to EQT’s favorable outlook. EQT is currently valued at 13 times next year’s projected earnings per share of $4.47.

Expand Energy Corporation, formed from the merger of Chesapeake Energy and Southwestern Energy, stands as the largest natural gas producer in the U.S. with significant assets in the Appalachian Basin and Haynesville Shale. The company also benefits from strong natural gas demand, fueled by growing data centers and an expanding manufacturing sector.

The merger has reportedly enhanced operational efficiency, with Expand Energy achieving a 50% increase in run-rate synergies and projecting $500 million in annual synergies this year, followed by $600 million next year. These efficiencies are anticipated to boost free cash flow by 30% this year and 20% next year. Analysts project Expand Energy to generate $9.63 in earnings per share next year, placing its forward valuation at 11.8 times earnings.

Ares Capital Navigates Middle-Market Lending

Ares Capital Corporation operates as a business development company (BDC), providing financing to middle-market companies with annual EBITDA between $10 million and $250 million. This role has become increasingly vital since the 2008-2009 Global Financial Crisis, as traditional banks face tighter regulations and higher capital requirements.

The company’s stock has recently faced headwinds due to investor concerns about elevated credit risk within its portfolio and potential declines in net investment income. These concerns were amplified by the bankruptcies of some private companies, though Ares Capital has stated it does not have direct exposure to those specific borrowers. Despite these challenges, Ares Capital maintains a diverse portfolio of debt investments, valued at approximately $28 billion, and has a long operational history in the middle-market lending space since 2004.

Ares Capital Corporation’s stock is currently priced at its book value and slightly below its five-year average, offering an attractive dividend yield of 9.5%.

Outlook on Value Opportunities

While the broader market experiences elevated valuations, specific opportunities exist within the energy sector, particularly with natural gas producers like EQT Corporation and Expand Energy, and in specialized financial services through Ares Capital Corporation. These companies are positioned to capitalize on fundamental demand shifts and market niches, potentially offering value to investors seeking diversification.