The Nasdaq is one of the top three most-followed stock market indices in the United States, comprising over 2,500 stocks. Its composition is heavily skewed towards the Technology sector, and as of February 10, 2025, the technology sector constituted around 60% of the index’s weight. Consumer Discretionary follows as the second-largest sector, accounting for approximately 20% of the weight. Given this substantial weighting, the Nasdaq is commonly regarded as a leading indicator of the performance of the IT industry.
While the Nasdaq includes tech giants with the largest market capitalizations, it also presents opportunities to invest in stocks often referred to as “penny stocks.” These stocks, priced under $5, offer significant growth potential for investors seeking high returns at a relatively low capital outlay. Although these stocks come with high return and diversification opportunities, they also carry higher risks due to their smaller market capitalization, relatively higher debt, and greater volatility in share prices.
To provide a perspective on the small-cap investing landscape, we refer to recent insights from Francis Gannon, Co-Chief Investment Officer at Royce Investment Partners. In November 2024, during an interview with Yahoo Finance, Gannon discussed his thesis on small-caps. He noted that small-caps had been out of favour for an extended period, with the Russell 2000 reaching its peak three years ago and experiencing negative returns since then. Gannon believes the new Trump administration, reshoring efforts, leading innovation, and a favourable earnings season will significantly boost small-cap companies, describing this shift as nothing short of a “revolution.”
As a result, exciting return opportunities are anticipated in the small-cap space in the coming years. When reviewing stocks priced under $5, investors should carefully select emerging companies with innovative business models or disruptive technologies, and those that have the potential to deliver exponential growth as they capture market share, develop new products, or enter new markets.
On that note, we have compiled a list of the 10 best Nasdaq stocks under $5 to buy. Let’s explore these opportunities.
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Our Methodology
To identify the 10 best Nasdaq stocks under $5 to buy, we screened Nasdaq-listed companies with a market price below $5. We selected the 10 companies that were the most widely held by hedge funds and ranked them in ascending order of hedge fund holders, as of Q3 2024.
Note: All pricing data is as of market close on February 10.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best NASDAQ Stocks Under $5 to Buy
10. Arbutus Biopharma Corp. (NASDAQ:ABUS)
Current Market Price: $3.33
Number of hedge funds: 16
Arbutus Biopharma Corp. (NASDAQ:ABUS) is a clinical-stage biopharmaceutical company focused on developing innovative therapies for patients with chronic hepatitis B virus (HBV) infection. The company’s proprietary drug product candidates aim to address the limitations of current HBV treatments by targeting multiple stages of the viral lifecycle. Arbutus has a robust pipeline, including its lead compound Imdusiran (AB-729), an RNA interference therapeutic designed to reduce HBV surface antigen levels and reawaken the HBV-specific immune response.
On January 13, the company provided important Corporate and Financial updates that were highly positive towards its investment case. They highlighted three key aspects:
Firstly, Arbutus Biopharma Corp. (NASDAQ:ABUS) disclosed its plan to initiate a Phase 2b clinical trial combining imdusiran, interferon, and NA therapy in the first half of 2025. At the American Association for the Study of Liver Diseases (AASLD) – The Liver Meeting in November 2024, the company presented new data from its IM-PROVE I Phase 2a clinical trial, supporting its belief that imdusiran is differentiated from other RNAi therapeutics in development for HBV. With this success, the company is moving forward with the Phase 2b trial.
Secondly, the company has ongoing lawsuits against Pfizer/BioNTech and Moderna for their use of Arbutus’s patented lipid nanoparticle (LNP) technology in their COVID-19 vaccines. In the first case, the court is expected to provide its ruling in the first half of 2025, and for the latter, the trial date has been scheduled for September 24, 2025.
Thirdly, Arbutus Biopharma Corp. (NASDAQ:ABUS) expects to significantly reduce its net cash burn in 2025 to a range of $47 to $50 million, compared to a 2024 net cash burn of approximately $65 million. Additionally, the current cash position is sufficient to fund operations through the first quarter of 2028, indicating a stronger financial position that should support the company’s ongoing and upcoming projects.
9. EVgo Inc. (NASDAQ:EVGO)
Current Market Price: $2.92
Number of hedge funds: 17
EVgo Inc. (NASDAQ:EVGO) is an electric vehicle (EV) charging network in the United States, providing fast charging solutions for EV drivers. The company operates an extensive network of public charging stations, focusing on urban areas and high-traffic locations. EVgo is building and operating the necessary infrastructure and tools to accelerate the mass adoption of EVs for individual drivers, rideshare and commercial fleets, and businesses.
In December 2024, EVgo Inc. (NASDAQ:EVGO) achieved a significant milestone by securing a $1.25 billion guaranteed loan facility from the U.S. Department of Energy (DOE). This funding is aimed at supporting the company’s future efforts to construct 7,500 new fast charging stalls nationwide. With this expansion, EVgo’s total owned and operated network is expected to reach at least 10,000 fast charging stalls, effectively tripling its network footprint by 2029 and providing a substantial competitive advantage.
JP Morgan has recently reiterated EVgo Inc. (NASDAQ:EVGO) as its top pick in the Clean Energy sector. While the analyst acknowledges that the Trump administration may de-prioritize clean energy, there remains potential for further support due to considerations of energy independence and protectionism against China. The analyst believes that negative sentiment on the stock is overblown, noting that EVgo’s business model is well-positioned for growth. He expects investors to adopt a more positive outlook on the stock as 2025 progresses.
