In this article, we will look at the 10 Best Small-Cap Growth Stocks to Buy Now.
Are Small-Cap Stocks Poised for Growth?
On November 4, 2024, Nick Sheridan, Portfolio Manager at Janus Henderson released a report on small-cap stocks exploring how these stocks offer unique growth and diversification opportunities. Sheridan highlighted that maintaining visibility amidst the dominance of mega-cap tech stocks has been a challenge for small-cap stocks. Historically, small caps have been overshadowed by larger companies, which have captured investor attention with themes like artificial intelligence and have seen ever-higher multiples as a result. However, Sheridan notes that this is not a new phenomenon. Small caps have consistently delivered higher earnings growth than large caps over time, therefore, making them an attractive option for investors seeking growth and diversification.
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In recent years, mega-cap tech stocks have been the driving force behind the stock market, but cracks have begun to appear in their performance, leading investors to seek value elsewhere. On the other hand, as interest rates are expected to decrease, small caps are poised to benefit, as they historically perform well in such environments. Sheridan highlighted that the key to small-cap outperformance lies in their ability to grow earnings more rapidly than large-caps, which struggle to achieve significant growth due to their size and market penetration. Small caps can expand into new markets, acquire new clients, or broaden their product range more easily than larger companies.
Moreover, small caps also serve as a diversification tool for investors. They often operate in different sectors, such as industrials and materials, and are more focused on local markets, providing exposure to structural trends like de-globalization. Sheridan noted that despite their potential, small caps remain under-researched and undervalued, offering opportunities for investors willing to conduct thorough research to identify quality growth companies. In addition, the persistent merger and acquisition activity, where larger companies acquire smaller ones at a premium, further supports the case for investing in small caps. According to Bloomberg, 95% of M&A deals involve a small-cap target, thereby adding substance to Sheridan’s argument. Lastly, Sheridan concluded by mentioning that small caps remain an undiscovered territory for many investors, requiring more effort to uncover hidden gems but offering substantial rewards for those who do.
With that let’s take a look at the 10 best small-cap growth stocks to buy now.
A close-up of a computer screen with a graph of the CRSP US Small Cap Value Index.
Our Methodology
To curate the list of the 10 best small-cap growth stocks to buy now, we used the Finviz stock screener, Seeking Alpha, and Insider Monkey’s Q4 2024 hedge funds database. Using the screener we compiled an initial list of small-cap growth stocks. Next, we used Seeking Alpha to shortlist stocks that have grown more than 30% during the past 3 years. Lastly, we ranked the stocks in ascending order based on the number of hedge fund holders sourced from Insider Monkey’s database.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Best Small-Cap Growth Stocks to Buy Now
10. Red Cat Holdings, Inc. (NASDAQ:RCAT)
3-Year Sales Growth: 31.25%
Number of Hedge Fund Holders: 9
Red Cat Holdings, Inc. (NASDAQ:RCAT) specializes in providing products and services for the drone industry. It creates drones that are utilized by the military, government, and for consumer applications. Some of their notable drones include Golden Eagle drones that have been approved by the US Department of Defense for reconnaissance and public safety tasks.
The company recently came under the spotlight when it announced its partnership with Palantir Technologies Inc. to enhance the capabilities of its Black Widow drones. Under this partnership, Palantir’s VNav software will be integrated into Black Widow drones to enable autonomous navigation without relying on GPS. The partnership will make Black Widow drones more capable of military operations by enabling them to operate effectively in GPS-denied environments.
In addition to this, Red Cat Holdings, Inc. (NASDAQ:RCAT) on January 23, announced securing new orders worth $518,000 for its Edge 130 drones from the US Army National Guard and another U.S. Government Agency. This indicates a strong military and government use case for its drones. It is one of the best small-cap growth stocks to buy now.
9. Navitas Semiconductor Corporation (NASDAQ:NVTS)
3-Year Sales Growth: 63.13%
Number of Hedge Fund Holders: 13
Navitas Semiconductor Corporation (NASDAQ:NVTS) is a technology company that specializes in power semiconductors, which are essential components used to manage and convert electrical power in various electronic devices. It is known for its Gallium Nitride Power Integrated Circuits, these advanced chips help improve the efficiency and speed of power conversion. The GaN technology is highly effective in laptop and mobile fast chargers, consumer electronics, data centers, and electric vehicles.
Meridian Contrarian Fund in their third quarter 2024 investor letter announced increasing their position in the company on the back of the long-term outlook for energy efficient semiconductors. The fund mentioned GaN technology to be one of the key differentiators for Navitas Semiconductor Corporation (NASDAQ:NVTS) and they are also confident in the company’s ability to surpass the current cyclical downturn.
In addition, the company is set to showcase significant advancements in its gallium nitride and silicon carbide technologies at the APEC 2025 conference. According to the company’s press release, it will present GaNFast Power ICs, integrated circuits that are designed for fast and efficient power conversion, and SiCPAK High-Power Modules, which offer enhanced endurance and performance for applications like EV charging and energy storage systems. Navitas Semiconductor Corporation (NASDAQ:NVTS) is one of the best small-cap growth stocks to buy now.
Meridian Contrarian Fund stated the following regarding Navitas Semiconductor Corporation (NASDAQ:NVTS) in its Q3 2024 investor letter:
“Navitas Semiconductor Corporation (NASDAQ:NVTS) designs and produces highly efficient power semiconductors, leading the way in Gallium Nitride (GaN) technology, which enables superior energy efficiency and charging speeds compared to traditional silicon. Handling GaN is challenging, and Navitas has a significant competitive advantage with its technology. We initially invested in early 2023 when the company lost favor due to a downturn in the highly cyclical mobile phone end-market. The stock declined in the period when revenue guidance came in lower than expected, driven by continued weak conditions in the EV and solar markets, which delayed customer product launches. During the quarter, we increased our position, confident in the long-term secular outlook for energy-efficient semiconductors, Navitas’ ongoing technological leadership, and its strong balance sheet, with over $100m in net cash. We believe the company is well-positioned to weather the current cyclical downturn.”
8. GigaCloud Technology Inc. (NASDAQ:GCT)
3-Year Sales Growth: 41.99%
Number of Hedge Fund Holders: 14
GigaCloud Technology Inc. (NASDAQ:GCT) is a technology company that specializes in B2B technology for parcel merchandise. It does so through an online marketplace called GigaCloud Marketplace. The platform allows businesses to make payments, find products, and manage shipping through a single interface. It mainly targets the Asian Market and has resellers in the United States and Europe.
GigaCloud Technology Inc. (NASDAQ:GCT) has undergone significant business growth. During the fiscal third quarter of 2024, it surpassed 1000 active third-party sellers and grew its buyers by 85.5% year-over-year. As a result, the Gross Merchandising Volume for the marketplace increased by 80% during the same time to reach $1.23 billion for the trailing 12 months ending September 30, 2024. Looking ahead, management has plans to expand geographically and improve its marketing efforts by attracting more third-party sellers and buyers. It is one of the best small-cap growth stocks to buy now.
7. Capricor Therapeutics, Inc. (NASDAQ:CAPR)
3-Year Sales Growth: 324.93%
Number of Hedge Fund Holders: 14
Capricor Therapeutics, Inc. (NASDAQ:CAPR) is a biotechnology company that focuses on developing new treatments for rare diseases. It uses two main approaches called Cell Therapy and Exosome Technology. In Cell Therapy, its lead product is CAP-1002 which uses cells derived from the heart to treat Duchenne muscular dystrophy, which is a severe muscle disorder. On the other hand, the Exosomes are tiny particles that can carry medicines to specific parts of the body.
On January 3, Jason McCarthy, analyst at Maxim Group maintained a Buy rating on the stock with a price target of $25. The analyst expressed optimism about the progress of Deramiocel, which the company is advancing through late-stage clinical trials for Duchenne muscular dystrophy cardiomyopathy. McCarthy also noted that Capricor Therapeutics, Inc. (NASDAQ:CAPR) has requested a priority review for Deramiocel, which could expedite the approval process. If granted, this could result in a faster approval timeline, potentially securing a PDUFA date in the second half of 2025. It is one of the best small-cap growth stocks to buy now.
6. NextNav Inc. (NASDAQ:NN)
3-Year Sales Growth: 80.14%
Number of Hedge Fund Holders: 22
NextNav Inc. (NASDAQ:NN) specializes in providing advanced positioning, navigation, and timing solutions. These solutions aim to improve the limitations of traditional GPS systems, which rely on satellites. The company offers two main services including Pinnacle, which is a vertical positioning system that helps devices accurately determine their altitude. It works with smartphones, IoT devices, and other equipment that have a barometric pressure sensor. Moreover, it also provides TerraPoiNT, a system that uses a terrestrial network to provide more reliable and secure location services compared to GPS.
NextNav Inc. (NASDAQ:NN) is actively pursuing its proposal to reconfigure the lower 900 MHz band to create a terrestrial backup and complement to GPS. It has submitted formal comments to the FCC, highlighting the lack of a wide-scale terrestrial PNT system and emphasizing the importance of its proposal. Laughing Water Capital in its Q4 2024 investor letter stated the company was the largest contributor in their portfolio in terms of returns. The fund noted that the commentary of FCC Chair Brendan Carr and other Commissioners suggests the chances for approval of the proposal are high as terrestrial GPS is a National Security priority.
During the fiscal third quarter of 2024, NextNav Inc. (NASDAQ:NN) delivered $1.6 million in revenue, up from $1.0 million in Q3 2023. Management attributed the growth to being driven by higher service revenue from contracts with government and commercial customers. It is one of the best small-cap growth stocks to buy now.
Laughing Water Capital stated the following regarding NextNav Inc. (NASDAQ:NN) in its Q4 2024 investor letter:
“NextNav Inc. (NASDAQ:NN) – Nextnav, our next-gen GPS / wireless spectrum investment, was our largest contributor to 2024 returns, and remains our largest position. At this time we are in a holding pattern with Nextnav as we wait for updates from the Federal Communications Commission (FCC) on the Company’s petition to update the rules that govern the 900 MHz spectrum band in a way that will allow for the creation of a terrestrial GPS system in the U.S., as well as ~15 MHz of 5G spectrum.
There is some uncertainty surrounding this process, but commentary from incoming FCC Chair Brendan Carr and other Commissioners suggests the chances for approval are favorable as terrestrial GPS is a National Security priority, and refilling the spectrum pipeline is an FCC priority.
The stock has been under heavy pressure in recent weeks as two different private equity funds – one a 2005 vintage, and the other a 2012 vintage – appear to have reached the end of their fund lives and are thus aggressively selling shares. I suspect this overhang will clear with time…” (Click here to read the full text)
5. Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH)
3-Year Sales Growth: 45.03%
Number of Hedge Fund Holders: 23
Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH) is a biopharmaceutical company that focuses on creating treatments for people with autoimmune diseases, which are conditions where the body’s immune system mistakenly attacks its own tissues. It has developed a medicine called LUPKYNIS, which is used to treat lupus nephritis, and is also working on a new treatment called AUR200, which aims to help people with other autoimmune diseases.
During the fiscal third quarter of 2024, the company achieved $67.8 million in total net revenue, marking a 24% increase from the previous year. Notably, net product revenue was $55.5 million, up by 36% year-over-year. The growth was driven by a 25% year-over-year increase in patients on LUPKYNIS therapy. Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH) is expanding geographically too, as LUPKYNIS has received approval in Japan. Management anticipates low double-digit royalties on net sales in Japan. It is one of the best small-cap growth stocks to buy now.
4. Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY)
3-Year Sales Growth: 36.09%
Number of Hedge Fund Holders: 26
Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) is a pharmaceutical company that specializes in developing and selling medicines for people with rare neurological diseases. It focuses on conditions that often don’t get enough attention from other companies. Its main product is WAKIX which helps treat excessive daytime sleepiness and cataplexy in people with narcolepsy by enhancing histamine signaling in the brain. The company is also working on other treatments, including those for epilepsy and neuropsychiatric disorders, aiming to address unmet medical needs in these areas.
On February 19, Ami Fadia analyst at Needham maintained a Buy rating on the stock, however with a reduced price target of $50 from the previous target of $52. The analyst noted that the company has faced a setback as the FDA refused to accept the supplemental New Drug Application for pitolisant in treating idiopathic hypersomnia. Additionally, the Phase 3 INTUNE study also did not meet its primary endpoint. However, despite the challenges, Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) is developing next-generation formulations, such as pitolisant HD. This new formulation aims to improve efficacy and bioavailability, potentially leading to better outcomes in the future. Faida sees this as a strategic move that could yield long-term benefits. The optimism stems from the company’s innovative pipeline and the significant unmet needs in the neurological disease market. It is one of the best small-cap growth stocks to buy now.
3. Sage Therapeutics, Inc. (NASDAQ:SAGE)
3-Year Sales Growth: 86.99%
Number of Hedge Fund Holders: 27
Sage Therapeutics, Inc. (NASDAQ:SAGE) is a biopharmaceutical company specializing in developing solutions for brain health disorders. Its key products include ZURZUVAE, which is a neuroactive steroid acting as a positive allosteric modulator of GABA receptors, targeting both synaptic and extrasynaptic GABA receptors. The company has a robust pipeline including SAGE-324, a novel GABA receptor-positive allosteric modulator intended for chronic oral dosing, and other compounds like SAGE-319, SAGE-039, and SAGE-817.
In 2024, Sage Therapeutics, Inc. (NASDAQ:SAGE) experienced significant success with the early commercialization of ZURZUVAE as the drug was marked as the first oral treatment approved for adults with postpartum depression (PPD). During the fiscal fourth quarter of 2024, nearly 2,500 prescriptions of ZURZUVAE were shipped, marking a 21% increase from the third quarter despite fewer days in the field due to the holiday season. Moreover, across the full year, more than 6,600 prescriptions were shipped, indicating strong demand growth.
Looking ahead, Sage Therapeutics, Inc. (NASDAQ:SAGE) plans to invest in a joint sales force expansion to cover more healthcare providers. It also plans to invest in media opportunities to amplify the message that PPD is an urgent medical condition and increase awareness through social media and direct-to-consumer efforts, including potential branded TV media. It is one of the best small-cap growth stocks to buy now.
2. UroGen Pharma Ltd. (NASDAQ:URGN)
3-Year Sales Growth: 30.91%
Number of Hedge Fund Holders: 30
UroGen Pharma Ltd. (NASDAQ:URGN) focuses on developing innovative treatments for urothelial and specialty cancers, as well as urologic diseases. The company uses a proprietary technology called RTGel, which is a reverse-thermal hydrogel that helps drugs stay in the body longer, making them more effective. Its main products include Jelmyto (MitoGel or UGN-101) and VesiGel (UGN-102). These treatments aim to ablate tumors without surgery, offering patients more effective and less invasive options for managing their conditions.
The company is making significant progress with UGN-102, a groundbreaking therapy for low-grade intermediate-risk non-muscle invasive bladder cancer. The FDA has accepted a New Drug Application for UGN-102, with a Prescription Drug User Fee Act target date of June 13, 2025. This is a pivotal step toward potential approval, which could make UGN-102 the first FDA-approved treatment for LG-IR-NMIBC. The market for UGN-102 is substantial, with over 80,000 addressable patients annually in the US, representing a potential market size of over $5 billion.
On February 19, Ladenburg kept a Buy rating on the stock with a price target of $31. The firm noted that they see a smooth path for the approval of UGN-102, which will be a positive step for UroGen Pharma Ltd. (NASDAQ:URGN). It is one of the best small-cap growth stocks to buy now.
1. MoneyLion Inc. (NYSE:ML)
3-Year Sales Growth: 53.57%
Number of Hedge Fund Holders: 34
MoneyLion Inc. (NYSE:ML) is a financial technology company that helps people manage their finances more effectively. It offers a range of financial tools and services, including mobile banking, personal loans, investment accounts, and cryptocurrency trading. These services are accessible through their mobile app and website. The company also provides curated financial content and insights to help users make informed decisions about their money.
Management aims for the company to become the number 1 destination for financial decision-making. It already saw a staggering increase in customers during the fiscal third quarter of 2024. The company reached 18.7 million customers, indicating a 54% increase year-over-year. As a result, MoneyLion Inc. (NYSE:ML) delivered record quarterly revenue of $135 million marking a 23% increase year-over-year.
Moreover, the company has also introduced MoneyLion Checkout, which is a new solution designed to simplify and unify the financial product shopping experience. It aims to allow users to complete financial transactions without leaving the MoneyLion platform, similar to how you can buy something on Amazon without being redirected to another website. It is the best small-cap growth stock to buy now.
While we acknowledge the potential of MoneyLion Inc. (NYSE:ML) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ML but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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