In this article, we look at the 11 best small-cap growth stocks to invest in. If you'd like to skip a primer on the pros and cons of investing in small-cap stocks, click here. 5 small growth stocks that are perfect for investment.
The small-cap sector of the stock market is significantly less covered than giant stocks like Apple and Microsoft. This is understandable since stocks in the latter category are of large companies that are global brand names. However, due to their large size, megacaps are weaker when considering return potential. With some exceptions, a high stock price not only means that the stock is less likely to achieve high double- or triple-digit returns, but also because it is too expensive. It also means that liquidity is limited, even though it is rising. Sold in units.
Conversely, small-cap stocks with market capitalizations of less than $2 billion come with their own risks. These are small companies and are unlikely to have more than $1 billion in total assets on their balance sheets. Not surprisingly, their large size means that small-cap stocks often have geographically limited markets compared to companies like semiconductor company AMD and consumer defensive retailer Walmart (NYSE: WMT). This is due to the fact that
A good example of how this dichotomy in market size also contributes to large differences in market value is the financial services industry. The industry is dominated by large-cap stocks such as New York City behemoth JPMorgan Chase & Co. (NYSE:JPM), the world's largest private bank by assets, as well as small-cap stocks such as Miami Lakes, Fla. I also have Regional bank Bank United, Inc. (NYSE:BKU). Looking at total assets as of December 2023, the big difference between these two banks, which belong to the same industry but only the latter is a small-cap stock, is clear.
For JP Morgan, the world's largest bank had an amazing total assets. $3.6 trillion – larger than the assets of some countries. Meanwhile, BankUnited's balance sheet totals $37 billion, less than the total value of Elon Musk's Tesla (NASDAQ:TSLA) stock.
Stock investing is all about returns, so the next step in analyzing small-cap stocks is to see how their performance differs from large- and giant-cap stocks. After all, the fact that JPMorgan's market cap is $504 billion, while United Bank's market cap is $1.99 billion, should somehow impact returns. Now, let's continue our discussion of small-cap stocks in financial services. In terms of 12-month price appreciation, the top three financial services stocks with recent price performance are American Coastal Insurance Corporation (NASDAQ:ACIC), Prairie Operating Co. (NASDAQ:PROP), and CleanSpark, Inc. (NASDAQ:CLSK). The company's stock is up 961%, 336%, and 374% over the past 12 months, outperforming the gains of 7 AI semiconductor stock darling NVIDIA Corporation (NASDAQ:NVDA).
However, if you look at the stock price gains of large-cap stocks in the financial services industry, the top three are Coinbase Global, Inc. (NASDAQ:COIN), Nu Holdings Ltd. (NYSE:NU), and First Citizens BancShares. , Inc. (NASDAQ:FCNCA). The company's stock price has increased by 151%, 103% and 93% over the past 12 months. This confirms that small-cap stocks have considerable power in delivering profits. The large difference in returns may be due to the fact that, given valuations, small-cap stocks have been trading at about a 20-year discount to large-cap stocks.
However, while the outlook for small-cap stocks is rosy, it does come with its own set of caveats. For example, these companies often face liquidity problems, which may restrict trading in their shares. Alternatively, an unfavorable economic event, such as a recession or a crisis in the local banking industry, could cause stock prices to decline and the principal invested to be lost.
With these details in mind, let's take a look at some of the best small-cap stocks that hedge funds are investing in. Notable small-cap names in this list are ON Semiconductor Corporation (NASDAQ:ON), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), and Flex Ltd. (NASDAQ:FLEX).
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our methodology
To create our list of the best small-cap stocks, we ranked the Janus Henderson Triton Fund's 100+ holdings by the number of hedge funds that purchased the stock as of the end of Q4 2023. Not surprisingly, the small-cap stocks with the highest number of hedge fund shareholders were selected.
For these best small-cap stocks, we used hedge fund sentiment. The top 10 consensus stocks selected by hedge funds have outperformed the S&P 500 index by more than 140 percentage points over the past 10 years (Please see here for the detail). That's why we pay close attention to this often ignored metric.
11 small growth stocks that are perfect for investment
11. 89bio, Inc. (NASDAQ:ETNB)
Number of hedge fund investors at end of Q4 2023: 30
89bio, Inc. (NASDAQ:ETNB) is a small biotechnology company developing treatments for liver disease and other diseases. This is a strong start to our list of best small-cap growth stocks, as the stock has an average rating of “Strong Buy” and an average analyst price target of $30.67.
As of the end of Q4 2023, 30 out of 933 hedge funds surveyed by Insider Monkey had purchased or owned 89bio, Inc. (NASDAQ:ETNB) stock. Peter Korczynski's RA Capital Management was the company's largest hedge fund investor, with a $127 million stake.
Along with Neurocrine Biosciences, Inc. (NASDAQ:NBIX), ON Semiconductor Corporation (NASDAQ:ON), and Flex Ltd. (NASDAQ:FLEX), 89bio, Inc. (NASDAQ:ETNB) is a top small-cap growth stock .
10. Globus Medical, Inc. (NYSE:GMED)
Number of hedge fund investors as of end of Q4 2023: 31
Globus Medical, Inc. (NYSE:GMED) is a medical device company that provides products that enable the proper functioning of the human musculoskeletal system. 2024 has been a dynamic year for the company, to say the least. After layoffs related to the merger, the company made headlines by appointing a new chief financial officer and executive officer.
In terms of holdings in the fourth quarter of 2023, 31 of the 933 hedge funds tracked by Insider Monkey purchased the company's stock. The largest hedge fund stakeholder in Globus Medical, Inc. (NYSE: GMED) is Stephen Dubois' Camber Capital Management, which owns his 2.2 million shares worth $119 million. I own it.
9. Lantheus Holdings Co., Ltd. (NASDAQ:LNTH)
Number of hedge fund investors at end of Q4 2023: 42
Lantheus Holdings, Inc. (NASDAQ:LNTH) is a medical diagnostic materials product provider headquartered in Bedford, Massachusetts. The company's stock is rated a Strong Buy on average, and 2024 will be an important year for the company as it takes on a new CEO and aims to maintain strong earnings.
Insider Monkey studied 933 hedge funds' portfolios during the fourth quarter of last year and found 42 investors in Lantheus Holdings, Inc. (NASDAQ:LNTH). Ken Griffin's Citadel Investment Group held the largest stake of these, valued at $54.4 million.
8. Crown Holdings Co., Ltd. (NYSE:CCK)
Number of hedge fund investors at end of Q4 2023: 46
Founded in 1892, Crown Holdings, Inc. (NYSE:CCK) is one of the oldest companies on our blue-chip small-cap stock list. We manufacture and sell packaging products around the world. The fourth quarter results announced in February 2024 shocked investors, with the stock price dropping 21% in the aftermath. Check your earnings records to find out what happened.
In the fourth quarter of 2023, 46 of the 933 hedge funds tracked by Insider Monkey invested in the company. The largest shareholder in Crown Holdings (NYSE: CC K) is Lauren Taylor Wolf's Impactive Capital, with his $272 million investment.
ON Semiconductor Corporation (NASDAQ:ON), Crown Holdings, Inc. (NYSE:CCK), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), and Flex Inc. (NASDAQ:FLEX) This is a small-cap growth stock to watch. It's piling up.
7. SS&C Technologies Holdings Co., Ltd. (NASDAQ:SSNC)
Number of hedge fund investors at end of Q4 2023: 50
SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is an American software company whose products form the backbone of financial services companies. The company has struggled financially recently, failing to beat analysts' EPS estimates in any of the last four quarters, but Richard Pezena's hedge fund will take a stake in the company in the fourth quarter of 2023. The amount was increased by approximately $24 million.
The company was a shareholder in 50 of the 933 hedge funds surveyed by Insider Monkey during the quarter. The largest shareholder is Richard S. Pzena's Pzena Investment Management, with $884 million worth of stock.
6. ImmunoGen, Inc. (NASDAQ:IMGN)
Number of hedge fund investors as of end of Q4 2023: 67
ImmunoGen, Inc. (NASDAQ:IMGN) is another biotechnology company on our list of blue-chip small-cap stocks. The company is developing treatments to help cancer patients, and the stock is rated a Buy on average, despite numerous downgrades in December 2023, when pharmaceutical giant Abby announced it would acquire the company. .
Insider Monkey examined 933 hedge funds' portfolios for the December 2023 quarter and found 46 ImmunoGen, Inc. (NASDAQ:IMGN) shareholders. Peter Korczynski's RA Capital Management became the company's biggest investor with a $704 million stake.
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Disclosure: None. 11 small growth stocks that are perfect for investment Originally published on Insider Monkey.
