In this article, we’re going to talk about the 10 best-performing small-cap stocks in 2024.
The Case for Small Caps
The recent Fed rate cut has made the market cautiously optimistic. Despite the unusual timing, historical data suggests a continued upward trend. Recently, we discussed the Dow’s new all-time high. The major stock index recently surpassed its previous peak, closing at a record-breaking level. This surge was fueled by a combination of factors, including positive investor sentiment following a central bank rate cut and broader economic optimism. This record-breaking performance reflects a strong upward trend in the market, indicating robust investor confidence and a favorable economic outlook.
Here’s an excerpt from the article on 10 Best Performing Stocks in 2024:
“The Dow Jones Industrial Average has recently made headlines by closing above the 42,000 mark for the first time, a significant milestone that reflects a surge in investor confidence following a substantial interest rate cut by the Fed. This momentous achievement occurred on September 19, when the Dow jumped over 500 points, closing at 42,063.36. This rise was part of a broader trend in the stock market, with major indices experiencing overall gains throughout the week, largely fueled by optimism surrounding the Fed’s decision to lower interest rates by 0.5%.
On September 21, Edward Yardeni, president of Yardeni Research, while acknowledging that the market tends to keep rising, also discussed the warning signs of a melt-up, in the context of the markets’ response to the September rate cut on CNBC’s ‘Closing Bell’. He doubted the necessity of such a large rate cut, suggesting that the economy is currently growing at about 3% year-over-year and could potentially grow even faster. Yardeni noted that while productivity gains are expected to be more pronounced shortly, he would have preferred to see the market stabilize for a while instead of continuing its upward trajectory.”
Richard Bernstein, CEO of Richard Bernstein Advisers, joined CNBC’s ‘The Exchange’ on September 24 to provide insights on the performance of small-cap stocks. He noted that while small caps have been performing well, they have not kept pace with more speculative investments, such as cryptocurrencies, which have seen significant gains. Bernstein expressed concern that this trend could signal to the Fed that their liquidity measures may have been excessive, as funds are not being directed towards productive uses in the economy.
He elaborated on his bullish stance regarding mid-cap and small-cap stocks, emphasizing that these categories are expected to experience substantial earnings growth. By the end of this year or early next year, Bernstein forecasts that small caps will grow at a rate significantly higher than the MAG 7 tech stocks. He pointed out that this phenomenon is typical when profit cycles hit a trough; small caps tend to be more sensitive to upturns in profitability, and noted the Fed’s current easing policies are occurring simultaneously with an environment of accelerating profits, an unusual combination that could fuel economic growth.
When asked about the current market dynamics favoring mega-cap stocks over smaller ones, Bernstein acknowledged that many managers are indeed gravitating towards these larger companies. However, he cautioned that from a fundamental investment perspective, mega-cap stocks are generally slower-growing and more expensive compared to other market segments. He argued that historically, a combination of cheaper and faster-growing stocks has proven to be advantageous for investors.
Bernstein also discussed the implications of rising gold prices and the performance of cryptocurrencies following recent Fed actions. He distinguished between gold and cryptocurrencies, suggesting that while gold has legitimate economic uses, cryptocurrencies often do not serve productive economic functions. He expressed concern over the speculative fervor in the market, arguing that excessive financial asset inflation can be as detrimental as real asset inflation. This misallocation of capital can lead to inflationary pressures as resources are diverted from essential sectors like infrastructure to less productive areas such as cryptocurrencies.
Overall, Bernstein’s insights reflect a cautious optimism regarding small-cap stocks amidst broader market trends. With that, we’re here with a list of the 10 best-performing small-cap stocks in 2024.
Methodology
We used stock screeners to look for companies trading between $1 billion and $10 billion, that’s our definition of small-cap stocks. We then selected the top 10 stocks with the best year-to-date performance and that were also the most popular among elite hedge funds. The stocks are ranked in ascending order of their year-to-date performance.
Why are we interested in 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 Performing Small-Cap Stocks in 2024
10. Vera Therapeutics Inc. (NASDAQ:VERA)
Year-to-Date Performance as of September 23: 185.18%
Market Cap as of September 23: $2.40 billion
Number of Hedge Fund Holders: 43
Vera Therapeutics Inc. (NASDAQ:VERA) is a clinical-stage biotechnology company focused on developing treatments for immunological and inflammatory diseases, aiming to improve the lives of patients with conditions like lupus and myasthenia gravis. The mission is to advance innovative treatments that address unmet medical needs in the field of immunology.
The company’s Atacicept, a promising treatment for IgAN and lupus nephritis, is showing significant progress in clinical trials. With its FDA Breakthrough Therapy Designation earlier this year, Atacicept could soon be available to patients, potentially revolutionizing the treatment of these conditions. Positive data from the ORIGIN trial suggest that Atacicept effectively reduces markers of IgAN, offering hope for improved outcomes.
There was a loss per share of $0.62 in the second quarter of 2024, compared to $0.46 for the same period in the previous year. Net loss in this period was $33.7 million, higher than the net loss of 20.2 million in the year-ago second quarter, due to primarily due to high operating expenses associated with its research and development activities. As of June 30, 2024, the company had $384.4 million in cash, which it believes is sufficient to fund operations through Atacicept’s potential approval and US launch (topline results anticipated in Q2 2025).
It expects to present 96-week ORIGIN trial data in Q4 2024 and complete patient enrollment in the pivotal ORIGIN 3 trial by Q3 2024. Topline data from ORIGIN 3 is anticipated in Q2 2025, which could lead to regulatory approval for Atacicept as a potential first-in-class B-cell modulator for IgAN.
As the company is focused on developing treatments for autoimmune diseases, it is also developing MAU868, a monoclonal antibody for BKV, a threat in kidney transplants. The company owns all global rights to both MAU868 and Atacicept.
Vera Therapeutics Inc. (NASDAQ:VERA) has strengthened its executive team with the appointment of David Johnson as COO. This strategic move positions the company to effectively advance its drug pipeline and prepare for potential commercialization, positioning it to become an industry leader.
9. Sweetgreen Inc. (NYSE:SG)
Year-to-Date Performance as of September 23: 221.74%
Market Cap as of September 23: $4.15 billion
Number of Hedge Fund Holders: 27
Sweetgreen Inc. (NYSE:SG) is an American fast casual restaurant chain that serves salads, hence specializing in healthy, seasonal salads and bowls. It is known for its commitment to using fresh, high-quality ingredients and offering customizable menu options to inspire healthier eating habits and make healthy food accessible to everyone.
It has partnered with growers to control its vegetable supply chain, offering a competitive advantage. While selling salads has low barriers to entry, developing a supply chain does, giving the company a unique edge over potential competitors.
The company’s focus on digital innovation and plant-based food aligns with growing consumer trends. This enhances customer experience and positions it to capitalize on the rising demand for health-focused food. In Q2 2024, the company was able to make $184.64 million in revenue, up 21.06% year-over-year.
Team source sales grew 9%, consisting of a 5% benefit from menu price and 4% positive traffic and mix. A lot of growth was driven by the launch of Caramelized Garlic Steak, disciplined operational execution, and strong restaurant openings. Dinner now represents 40% of sales, excluding the 2 p.m. to 4 p.m. midday day part.
Sweetgreen Inc. (NYSE:SG) opened 4 new restaurants in Q2, including its first in New Hampshire. New restaurants are performing well, outpacing the existing fleet average. It relaunched the new openings playbook to prioritize real estate, leadership, and brand awareness. The Infinite Kitchen retrofit in Penn Plaza is performing well and the company is on track to open 7 more in 2024.
With strong top-line performance in the emerging markets, management expects a growth rate of 15% to 20% annually, with 2025 at the lower end and 2026+ at the upper end. Sweetgreen Inc.’s (NYSE:SG) specialty business requires careful market penetration and store location, and the business is cyclical but benefits from the growing popularity of healthy foods among younger generations.
Meridian Small Cap Growth Fund stated the following regarding Sweetgreen, Inc. (NYSE:SG) in its first quarter 2024 investor letter:
“Sweetgreen, Inc. (NYSE:SG) operates restaurants serving fresh and healthy foods in the United States. The salad-focused restaurant concept has invested heavily to develop a captive network of growers that help ensure the freshness of its produce, a distinct competitive advantage. Additionally, management’s investment in automation technology, known as the “Infinite Kitchen,” has shown strong promise of significant labor cost savings, a reduction of order fulfillment errors, and increased restaurant throughput. While Infinite Kitchen has only been tested in a handful of stores to date, initial data supports the potential for automation technology to significantly improve both margins and average unit volumes. The stock rose in the quarter on accelerating same-store sales growth and better than expected guidance from management. In addition, investors took notice that material margin improvements could quickly reduce Sweetgreen’s cash burn, a prior source of concern. Sweetgreen was a new position for the Fund in the quarter.”
8. Zeta Global Holdings Corp. (NYSE:ZETA)
Year-to-Date Performance as of September 23: 233.15%
Market Cap as of September 23: $6.77 billion
Number of Hedge Fund Holders: 27
Zeta Global Holdings Corp. (NYSE:ZETA) operates an omnichannel data-driven cloud platform that provides enterprises with consumer intelligence and marketing automation software globally, helping businesses acquire, engage, and retain customers through personalized marketing campaigns, using data analytics and AI.
Revenue for Q2 2024 was $227.84 million, up 32.61% from the year-ago period. there was balanced growth across several industry verticals, with 6 out of 10 growing 25% or more. The direct mix was 67%, where rapid growth with agency Holdco customers adopting social channel capability was an influence. Integrated revenue grew 71% year-over-year in Q2.
The insurance and automotive verticals continued to grow faster than expected. The agency business also grew, driven by new brands. Scaled customer count increased 10% year-over-year to 468 in Q2. Total quarterly scaled customer ARPU was $479,000, up 22% year-over-year. This was fueled by superscale customers, many of which were large agencies adding incremental brands.
The company is raising its full-year 2024 outlook by $25 million to $925 million, representing 27% year-over-year growth. This is driven by the AI revolution, which is accelerating the replacement cycle of marketing technology. AI is disrupting legacy marketing clouds, creating opportunities for innovative, agile, AI-powered companies like Zeta Global Holdings Corp. (NYSE:ZETA).
Enterprises are looking to Zeta Global Holdings Corp. (NYSE:ZETA) to improve productivity, deliver personalization, and achieve a better ROI on marketing programs. The company has been focused on AI for years and has a large proprietary data cloud. Its platform integrates with modern data warehouses and has strong identity resolution capabilities. Recent partnerships with Amazon and the launch of the Zeta Economic Index demonstrate its commitment to providing unique, actionable business intelligence to enterprises.
7. Viking Therapeutics Inc. (NASDAQ:VKTX)
Year-to-Date Performance as of September 23: 254.92%
Market Cap as of September 23: $7.31 billion
Number of Hedge Fund Holders: 50
Viking Therapeutics Inc. (NASDAQ:VKTX) is a clinical-stage biopharmaceutical company focused on developing novel therapies for patients suffering from metabolic and endocrine disorders and is working on treatments for conditions like obesity, non-alcoholic steatohepatitis (NASH), and thyroid disorders.
The company’s lead drug candidate is VK-2809, intended to treat patients with steatohepatitis. However, another key aspect of the drug is that it is a GLP-1 agonist, which also opens up the secondary weight loss drug market to the company. A key advantage of VK-2809 is that it is in tablet form, which makes the drug easier to administer as opposed to the injections that are currently dominating the market.
It is also developing the VK-2735 drug that also targets the weight loss market and increases the firm’s exposure to this multi-billion dollar industry. VK-2735 entered into Phase 2 trials in Q2. Patients receiving VK2735 demonstrated significant reductions in mean body weight from baseline, ranging up to 14.7%, as well as significant reductions in body weight relative to placebo, ranging up to 13.1%.
Viking Therapeutics Inc. (NASDAQ:VKTX) reported a net loss of $22.3 million in Q2 2024, compared to $19.2 million in Q2 2023. The increase in net loss was primarily due to higher research and development and general and administrative expenses, partially offset by increased interest income.
The company has a strong balance sheet with over $900 million in cash. This highlights the company’s ability to keep up with all of its pipeline programs. Many investors and hedge funds continue to support Viking Therapeutics Inc. (NASDAQ:VKTX) due to its growth potential and ability to challenge big pharma players.
Alger Mid Cap Focus Fund stated the following regarding Viking Therapeutics, Inc. (NASDAQ:VKTX) in its Q2 2024 investor letter:
“Viking Therapeutics, Inc. (NASDAQ:VKTX) is a clinical-stage biopharmaceutical company focused on developing novel therapies for patients suffering from metabolic and endocrine disorders. Their lead drug VK2809, a beta-selective thyroid hormone receptor agonist, is in development for nonalcoholic steatohepatitis and nonalcoholic fatty liver disease. Their VK2735 drug is a GLP-1 dual agonist being developed for patients with obesity. During the quarter, the company’s shares were negatively impacted by several factors: 1) a challenging environment for biotechnology stocks, exacerbated by Fed policy decisions to maintain elevated interest rates, 2) increased competition in the obesity treatment landscape, 3) manufacturability and scalability concerns regarding Viking’s obesity drug and 4) the absence of strategic partnerships from large pharmaceutical companies. Despite the challenging quarter, we continue to believe that the company’s GLP-1 drug has the potential to be a best-in-class obesity drug given its favorable efficacy and safety profile. Further, with approximately one-third of U.S. adults suffering from obesity, we believe the company’s GLP[1]1 drug has the potential to address a large market once approved.”
6. Core Scientific Inc. (NASDAQ:CORZ)
Year-to-Date Performance as of September 23: 262.79%
Market Cap as of September 23: $3.22 billion
Number of Hedge Fund Holders: 53
Core Scientific Inc. (NASDAQ:CORZ) provides digital asset mining services in North America, operating through two segments, Mining and Hosting. It owns and operates large-scale data centers that house mining equipment, providing miners with access to the necessary computing power and energy resources, to support the growth and development of the cryptocurrency industry by offering reliable and efficient mining infrastructure.
The company earns most of its revenue from mining bitcoin and is expanding into high-performance computing, which could generate nearly $6.7 billion in revenue over the next 12 years. Bitcoin mining revenue increased 14% in Q2 due to higher Bitcoin prices and increased mining operations. However, the number of bitcoins earned decreased by 52% due to the Bitcoin halving event and increased competition. Mining costs increased due to depreciation, higher wages, and stock-based compensation.
Core Scientific Inc. (NASDAQ:CORZ) is the first digital asset miner in North America to achieve 100, 250, and 500 megawatts of operating capacity. It announced a contract with CoreWeave to lease a 16-megawatt data center in Austin for high-performance computing (HPC) hosting. This data center was delivered ahead of schedule and began generating revenue in Q2 2024.
Total revenue generated in Q2 2o24 was $141.10 million, which also included the $5.5 million in HPC hosting revenue from the Austin data center. The overall revenue improvement was 11.18% year-over-year. Despite this growth, there was a loss per share of $4.51.
Its strong position in digital infrastructure positions it well for future growth. The status of successfully earning more bitcoin since 2021 than any other public company in North America and its strong industry position ranks it among some of the best-performing small-cap stocks in 2024.
5. Lumen Technologies Inc. (NYSE:LUMN)
Year-to-Date Performance as of September 23: 281.42%
Market Cap as of September 23: $7.13 billion
Number of Hedge Fund Holders: 18
Lumen Technologies Inc. (NYSE:LUMN) is a telecommunications company that offers communications, network services, security, cloud solutions, voice, and managed services through its fiber optic and copper networks, as well as its data centers and cloud computing services. The goal is to provide customers with a platform to connect, protect, and compute, enabling them to achieve their digital ambitions.
The company sees the AI TAM opportunity in 3 phases. Currently, the race is for companies developing large learning algorithms. These firms need to train these algorithms quickly to be ready for the next phase when larger enterprises will start using them to run their businesses. The connectivity being acquired is to support data center builds for this training.
With over $5 billion in major partnership inked to date, Lumen Technologies Inc. (NYSE:LUMN) sees a $7 billion revenue opportunity in data center networking. AI needs data, which requires data centers and connectivity, areas where this company excels. It is well-positioned for growth due to partnerships with Microsoft and Corning. These partnerships provide network infrastructure and fiber optic cables to support Microsoft’s Azure Cloud expansion and enhance Lumen’s supply chain. These developments have recently led to a 7% increase in its stock.
Revenue in Q2 2024 was $3.27 billion, down 10.73% year-over-year, due to divestitures and commercial agreements. Mass markets segment revenue declined 8.2%. Wholesale revenue declined 10% year-over-year. North American business declined 5.5%. International and other revenue declined by 67.1%. Large enterprise revenue declined 6.9%. Notable wins include Uber and the state of New Mexico. Customer satisfaction in the company’s service delivery process also improved significantly.
Although the company faces financial challenges and high debt levels, the positive market response suggests that the successful execution of its partnerships could lead to a turnaround. If it capitalizes on these opportunities, it could see substantial revenue and profit growth, making it an appealing investment despite its risks.
4. ADMA Biologics Inc. (NASDAQ:ADMA)
Year-to-Date Performance as of September 23: 337.94%
Market Cap as of September 23: $4.61 billion
Number of Hedge Fund Holders: 30
ADMA Biologics Inc. (NASDAQ:ADMA) is an end-to-end commercial biopharmaceutical company focused on developing and commercializing plasma-derived therapies. It is dedicated to manufacturing, marketing, and developing specialty plasma-derived biologics for the treatment of immunodeficient patients at risk for infection and others at risk for certain infectious diseases.
ASCENIV, a flagship product, is a 10% intravenous immune globulin (IVIG) product for treating Primary Humoral Immunodeficiency in adults and adolescents. ASCENIV contributes over 50% to the company’s total revenue. Its current market penetration is less than 3%, but management is confident in its growth potential.
In Q2 2024, the total revenue recorded was $107.19 million, with a 78.29% year-over-year improvement. In addition to the rapid growth of commercial product revenue, this growth was also favored by the accrual reversal related to historically estimated US Medicaid rebates for ADMA’s immunoglobulin products.
Its AI machine learning platform, ADMAlytics, is being expanded to commercial operations. ADMAlytics, implemented earlier this year, has yielded impressive results, including increased production efficiency, enhanced visibility, optimized commercial planning, streamlined plasma pooling, and reduced variability in FTE hours.
The company’s impressive financial results this quarter underscore its strong growth trajectory and potential for further expansion.
3. AST SpaceMobile Inc. (NASDAQ:ASTS)
Year-to-Date Performance as of September 23: 338.80%
Market Cap as of September 23: $4.19 billion
Number of Hedge Fund Holders: 15
AST SpaceMobile Inc. (NASDAQ:ASTS) is a satellite designer and manufacturer that aims to provide global cellular broadband coverage from space. It is developing a constellation of satellites that will enable users to connect to the internet from their existing mobile devices, regardless of their location on Earth.
The company successfully launched its first 5 commercial satellites, known as BlueBirds, on September 11. It took over 7 years and $1 billion to reach this point. These satellites will provide cellular broadband service and other applications. It’s targeting nearly 100% geographical coverage for the continental UA using a premium 850 MHz low-band spectrum. After in-orbit service activation, it will start with 5,600 sales across the country.
It also secured a major strategic financing partner and customer, adding Verizon to a top-tier group that also includes AT&T, Google, Vodafone, American Tower, Rakuten, Bell Canada, and others. This 100 million commitment from Verizon, including 65 million commercial prepayments and 35 million convertible notes, is another validation of its technology and business model.
Its scalability and cost position are expected to be tailwinds. The satellite constellation’s design allows for scalability in coverage area and number of users. By using existing mobile infrastructure and focusing on underrepresented areas, the company can provide cost-effective solutions. Vertical integration of 95% of satellite subsystems gives the company control over IP and manufacturing.
AST SpaceMobile Inc. (NASDAQ:ASTS) closed the second quarter of 2024 with $900K in revenue and $0.51 in loss per share. It continues to work on the production and deployment of Block 2 satellites, with adjusted cash operating expenses to remain in the range of $30 million and $35 million per quarter for the second half of 2024. It has promising long-term prospects due to innovative technology and strategic partnerships.
2. Janux Therapeutics Inc. (NASDAQ:JANX)
Year-to-Date Performance as of September 23: 377.26%
Market Cap as of September 23: $2.67 billion
Number of Hedge Fund Holders: 31
Janux Therapeutics Inc. (NASDAQ:JANX) is a clinical-stage biopharmaceutical company that develops immunotherapies based on Tumor Activated T Cell Engagers (TRACTr) and Tumor Activated Immunomodulators (TRACIr) platforms technology to treat patients suffering from cancer. It is working on a pipeline of drug candidates that target specific pathways involved in cancer cell growth and survival.
The company’s JANX007 drug, for pancreatic cancer, is currently in the Phase 1 human clinical trial and is currently enrolling patients. Another under-development drug is JANX008, which is a more diversified tumor drug that seeks to help patients with all cancers, except pancreatic cancers. Janux Therapeutics Inc. (NASDAQ:JANX) is also working with MERCK, and successful milestone payments from the pharma giant could inject tailwinds into the stock along with positive trial data.
It’s progressing several other programs within its TRACTr (Tumor Activated T Cell Engager) and TRACIr (Tumor Activated Immunomodulator) platforms, some of which are nearing development candidate status.
Revenue made in Q2 2024 was $8.90 million, up a major 741.72% year-over-year. But despite this massive growth, the company reported a net loss of $6.0 million compared to a net loss of $17.5 million for the comparable period in 2023. The earnings per share value was $0.16.
This was due to high Research and development expenses stable at $14.9 million. General and administrative expenses rose to $7.8 million, up from $6.9 million in the same quarter of 2023.
Janux Therapeutics Inc. (NASDAQ:JANX) strengthened its leadership by adding Eric Dobmeier and Natasha Hernday to its Board of Directors. They both bring valuable expertise to the company, positioning it for long-term success.
1. Avidity Biosciences Inc. (NASDAQ:RNA)
Year-to-Date Performance as of September 23: 388.73%
Market Cap as of September 23: $5.17 billion
Number of Hedge Fund Holders: 31
Avidity Biosciences Inc. (NASDAQ:RNA) a biopharmaceutical company engaged in the delivery of RNA therapeutics. It develops antibody oligonucleotide conjugates (AOC) that are designed to treat diseases previously untreatable with RNA therapeutics, creating RNA-based drugs that can target and correct underlying genetic defects.
In June, Avidity initiated the global Phase 3 HARBORTM trial evaluating del-desiran for myotonic dystrophy type 1 (DM1). The FDA granted del-desiran Breakthrough Therapy designation for DM1 earlier in May.
In August, it reported positive initial data from the Phase 1/2 EXPLORE44™ trial evaluating del-zota (delpacibart zotadirsen), a potential treatment for Duchenne muscular dystrophy (DMD44). Del-zota demonstrated favorable safety and tolerability in 25 participants across two dose levels (5 mg/kg and 10 mg/kg). Enrollment for the EXPLORE44 trial is now complete, and the company plans to enroll additional patients in the EXPLORE44 Open-label Extension study (OLE).
The company also reported positive initial data from the Phase 1/2 FORTITUDE trial evaluating del-brax for facioscapulohumeral muscular dystrophy (FSHD) in this quarter. The trial demonstrated unprecedented and consistent reductions of over 50% in DUX4 regulated genes, trends of functional improvement, and favorable safety and tolerability.
The company faced some challenges and experienced an 11.70% year-over-year decline, due to a rather heavy focus on R&D investment. Management announced plans to unveil its lead target from its precision cardiology program by Q4 2024, indicating an expansion beyond rare neuromuscular diseases into broader therapeutic areas. Such expansions position the company to become a leader in its industry.
While we acknowledge the growth potential of Avidity Biosciences Inc. (NASDAQ:RNA), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RNA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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