In this article, we will be taking a look at the 10 best small-cap healthcare stocks to buy now.
Healthcare Sector: A Defensive Investment with Growth Potential in 2024
In difficult economic times, healthcare equities are sometimes regarded as a defensive investment. This is because, even in recessions, people usually do not reduce their usage of prescription drugs or other necessary medical services. The Centers for Medicare and Medicaid Services (CMS) estimate that healthcare spending in the United States will grow at an average annual growth rate of 5.6% from 2027 to 2032.
Healthcare stocks are defensive, which means that investing in them can yield regular and stable returns for investors People will always require healthcare and medical services, regardless of the state of the economy or the performance of the stock market.
In the US, the healthcare industry is expanding rapidly. A recent estimate shows that the country’s healthcare spending grew by 7.5% in 2023, outpacing the nominal GDP growth rate for the same year. The record high of 93.1% of Americans having health insurance was largely to blame for the significant increase in healthcare spending last year. The global healthcare industry is projected to grow from $583 billion in 2022 to over $800 billion by 2027, with a 7% CAGR, according to McKinsey. Despite 2023 challenges like labor shortages and inflation, 2024 is expected to bring recovery and create attractive investment opportunities.
According to a December 2023 WHO report, global healthcare spending hit a record $9.8 trillion in 2021, or 10.3% of global GDP. However, spending distribution was uneven, with public health spending increasing globally except in low-income countries, where government health spending declined due to reliance on external aid. High-income countries spent about $4,000 per capita, while 11% of the global population lived in countries spending less than $50 per person annually on health. Despite the increase in public health spending during the COVID-19 pandemic, this growth is unlikely to continue due to economic challenges like slowing growth, high inflation, and increased debt.
As 2024 progresses, optimism in the healthcare sector is rising. Despite underperformance in 2023, financial analysts are expecting stronger results this year. BlackRock’s 2024 outlook highlights a “favorable risk-reward environment” for healthcare, noting that last year’s underperformance has created an attractive entry point for investors.
A healthcare professional wearing a lab coat, holding a vial of medication.
Our Methodology
For our methodology, we focused on selecting healthcare stocks with market capitalizations ranging between $300 million and $2 billion, characterized by high institutional ownership and positive analyst sentiment. After identifying the stocks that met these criteria, we ranked them according to the number of hedge fund holders as of Q2 2024.
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 Small-Cap Healthcare Stocks To Buy Now
10. Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP)
Number of Hedge Fund Holders: 30
Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) is a precision oncology company focused on developing innovative treatments for cancer and other serious illnesses. At its core, Corbus is dedicated to advancing scientific approaches that target well-understood biological pathways to help patients overcome challenging diseases.
Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) is focused on developing treatments that target well-understood biological pathways, with a promising pipeline that includes CRB-701, a next-generation antibody-drug conjugate (ADC) targeting Nectin-4 on cancer cells; CRB-601, an anti-integrin monoclonal antibody blocking TGF activation in cancer cells; and CRB-913, a second-generation peripherally restricted CB1 receptor inverse agonist for obesity treatment.
As of Q2 2034, around 30 hedge fund holders held a stake in the stock with Cormorant Asset Management being the largest stakeholder with 2,025,000 shares worth $91,631,250. The stock sports a Strong Buy rating based on 7 Wall Street Analysts. The average price target for Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) is $85.67, with forecasts ranging from $74.00 to $105.00, representing a 40.03% increase from the current price of $61.18.
9. Scholar Rock Holding Corporation (NASDAQ:SRRK)
Number of Hedge Fund Holders: 30
Scholar Rock Holding Corporation (NASDAQ:SRRK), based in Cambridge, Massachusetts, is a biopharmaceutical company focused on developing innovative treatments for severe diseases influenced by protein growth factors. Its primary products, Apitegromab and SRK-181, target conditions like spinal muscular atrophy (SMA) and resistant cancers.
A major catalyst for Scholar Rock Holding Corporation (NASDAQ:SRRK) is the upcoming topline data from the pivotal Phase 3 SAPPHIRE trial for apitegromab, expected in Q4 2024. Positive results could significantly boost investor confidence and potentially lead to FDA approval, dramatically increasing the company’s value. Beyond SMA, Scholar Rock’s pipeline includes SRK-439 for obesity and metabolic disorders.
Jay Backstrom, the President and CEO of Scholar Rock Holding Corporation (NASDAQ:SRRK) stated in the Q2 earnings call transcript:
“Starting with our anti-myostatin programs, Scholar Rock was instrumental in bringing myostatin back into the forefront as a therapeutic target. With apitegromab SMA, we’ve reestablished as a neuromuscular target and our emerging data with SRK-439 suggest the best-in-class potential to address the muscle loss associated with GLP-1 receptor agonist treatment, leading to sustainable healthy weight management in obesity. In our TGFβ1 programs with SRK-181 in immune oncology, we have pierced the immunosuppressive armor to overcome checkpoint inhibitor resistance. And for our latent TGFβ1 selective monoclonal antibody for fibrosis, now referred to as SRK-373, we applied our deep structural insights and antibody engineering expertise to solve a riddle that has not been done before”.
As of Q2 2024, around 30 hedge fund holders held stakes in the stock with Samsara BioCapital being the largest stakeholder with 6,788,609 shares worth $$56,549,113. The average price target is $28.00, with forecasts ranging from $23.00 to $31.00, representing a 201.08% increase from the current price of $9.30.
8. Avid Bioservices, Inc. (NASDAQ:CDMO)
Number of Hedge Fund Holders: 31
Avid Bioservices, Inc. (NASDAQ:CDMO) is a contract development and manufacturing organization (CDMO) specializing in biologics. The company provides services to pharmaceutical and biotech firms to develop and manufacture biological drugs, helping them bring their products to market.
A significant catalyst for Avid Bioservices, Inc. (NASDAQ:CDMO) is the completion of its three-year expansion program. The company has successfully brought online new mammalian and cell and gene therapy facilities, substantially increasing its production capabilities. This expanded capacity positions Avid to take on larger contracts and serve a broader range of clients in the rapidly growing biopharmaceutical market. The global trend towards outsourcing biopharmaceutical manufacturing is a key driver for Avid Bioservices’ growth. As more biotechnology companies focus on research and development, they are increasingly relying on CDMOs like Avid for production, creating a favorable market environment.
Dan Hart, the Chief Financial Officer at Avid Bioservices, Inc. (NASDAQ:CDMO), said in the Fiscal 2024 earnings call transcript:
“For the 2024 full fiscal year, revenues were $139.9 million, a decrease of approximately 6% compared to $149.3 million in the same prior year period. The decrease in revenues for the fiscal year that ended April 30, 2024, compared to the same prior year period was primarily attributed to fewer manufacturing runs, a reduction in process development services primarily from early-stage programs, and a reduction of revenue for changes in estimated variable consideration under a contract where uncertainties have been resolved. Gross profit for the fourth quarter of fiscal 2024 was $5.5 million or 13% gross margin compared to $8.4 million or 21% gross margin in the fourth quarter of fiscal 2023. Gross profit for the 2024 full fiscal year was $7.3 million or 5% gross margin, compared to a gross profit of $31.5 million or 21% gross margin for the 2023 full fiscal year.”
As of Q2 2024, around 31 hedge fund holders held stakes in the stock with BlueCrest Capital Mgmt. The stock holds a Strong Buy rating based on 3 Wall Street Analysts. The average price target is $11.00, with forecasts ranging from $8.00 to $14.00, representing a 4.36% increase from the current price of $10.54.
