In this article, we will look at the 10 Best Small-Cap Stocks to Buy Before They Explode.
Is Market Volatility Good For Small-Cap Stocks?
Since the announcement of tariffs, investors have been concerned regarding the market volatility. On February 4, 2025, Chris Clark, CEO and Co-CIO of Royce Investment Partners shared his insights as to how this market volatility can be helpful for small-cap stocks. February 2025 saw markets react negatively to President Trump’s announcement of tariffs on imports from China, Canada, and Mexico. Clark emphasized that it is still too early to gauge the positive or negative impacts of these tariffs on earnings and business fundamentals due to the current uncertainty. For instance, while initial announcements caused market disruption, subsequent negotiations led to temporary pauses on tariffs for goods from Mexico and Canada, restoring some measure of calm.
Clark highlighted that tariffs targeting Canada and Mexico appear to address non-economic issues like immigration and drug trade rather than purely economic concerns. This suggests they may be short-lived if their objectives are achieved. However, if sustained, these tariffs could significantly impact sectors such as housing, autos, and agriculture. Despite the disruption caused by these policies, Clark remains optimistic about the opportunities created by elevated market volatility. He argued that such environments allow active investors to distinguish high-quality companies from weaker ones, which he believes is an effective strategy for identifying long-term value amidst short-term uncertainty.
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Clark noted that tariffs will accelerate de-globalization, bring back business to the United States, and improve supply chain management in domestic manufacturing. These factors are anticipated to benefit the potential leadership of US small-cap stocks in the market. Clark cited that small caps have favorable valuations and their earnings are expected to grow. Additionally, the cyclical nature of markets and heightened volatility have historically benefited small-cap stocks relative to large-cap equities. His research shows that following periods of elevated volatility measured by the VIX index, small-cap stocks like those in the Russell 2000 tend to outperform large-cap counterparts over three-year horizons. Clark also stressed the importance of contrarian thinking during uncertain times. Drawing from decades of experience as a small-cap investor, he underscored how understanding market inflection points and challenging conventional wisdom are crucial for achieving long-term outperformance.
With that, let’s take a look at the 10 best small-cap stocks to buy before they explode.
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Our Methodology
To gather the 10 best small-cap stocks to buy before they explode we used the Finviz stock screener and CNN as our sources. Using the screener we aggregated a list of small-cap stocks (Market Cap of $500 million to $2 billion) with an upside potential of more than 50%. After sorting the list by market capitalization we cross-checked the analysts’ average upside potential of each stock from CNN. Lastly, we ranked these stocks in ascending order of the number of hedge fund holders, sourced from Insider Monkey’s Q4 2024 database. Please note that the data was recorded on March 25, 2025.
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 Stocks to Buy Before They Explode
10. Ardent Health Partners, Inc. (NYSE:ARDT)
Market Capitalization: $1.868 Billion
Analyst Upside Potential: 58.97%
Number of Hedge Fund Holders: 17
Ardent Health Partners, Inc. (NYSE:ARDT) is a leading provider of healthcare services in the United States. It delivers both general and specialty medical services through a network of 30 acute care hospitals and over 200 sites of care. These include primary and specialty care clinics, ambulatory surgery centers, urgent care centers, freestanding emergency departments, diagnostic imaging centers, and telehealth services.
On March 10, Analyst Joanna Gajuk from Bank of America Securities reiterated a Hold rating on the stock with a price target of $17. Her evaluation highlights both opportunities and risks for the company. The analyst noted that while the supplemental payments and subsidies remain unpredictable, potentially affecting future earnings, the expected approval of the New Mexico State-Directed Payment Program could significantly improve operating cash flows.
While the professional fees, especially in radiology, continue to increase, the company has been able to stabilize the nurse cost. Lastly, Gajuk believes that the potential regulatory shifts can create more acquisition opportunities, aligning with Ardent Health Partners, Inc. (NYSE:ARDT)’s joint venture expansion strategy. It is one of the best small cap stocks to buy before they explode as analysts expect more than 58% upside during the next 12 months.
9. Hillenbrand, Inc. (NYSE:HI)
Market Capitalization: $1.843 Billion
Analyst Upside Potential: 52.32%
Number of Hedge Fund Holders: 21
Hillenbrand, Inc. (NYSE:HI) is a global industrial company that specializes in providing highly engineered processing equipment and solutions. It operates through two main segments Advanced Process Solutions and Molding Technology Solutions. The Advanced Process Solutions segment designs manufactures, and services equipment and systems for industries such as plastics, food, pharmaceuticals, chemicals, and more. Whereas Molding Technology Solutions focuses on the plastic technology processing industry.
On March 17, KeyBanc analyst Jeffrey Hammond maintained a Buy rating on the stock with a price target of $40. During the fiscal first quarter of 2025, Hillenbrand, Inc. (NYSE:HI) noted that it has been reshaping its portfolio over the past few years. This includes divesting its death care segment and acquiring businesses in the food, health, and nutrition markets, which now account for nearly 30% of its revenue. Moreover, the company has also announced the sale of a 51% stake in Milacron injection molding and extrusion business to Bain Capital for $287 million, while retaining a 49% ownership stake. Management expects the transaction to generate around $250 million in net proceeds for debt reduction and realign its focus toward higher-margin, less cyclical businesses.
Looking ahead, it has also updated its full-year guidance and now expects revenue of around $2.63 billion to $2.8 billion. Analysts see more than 52% upside during the next 12 months, making Hillenbrand, Inc. (NYSE:HI) one of the best small cap stocks to buy before they explode.
8. Magnite, Inc. (NASDAQ:MGNI)
Market Capitalization: $ 1.853 Billion
Analyst Upside Potential: 54.37%
Number of Hedge Fund Holders: 25
Magnite, Inc. (NASDAQ:MGNI) is an independent sell-side advertising company that specializes in digital advertising technology solutions. It primarily focuses on automating the buying and selling of digital advertising inventory. On March 21, Omar Dessouky, an analyst from Bank of America Securities, maintained the Buy rating on the stock while keeping the price target at $20. It is one of the best small cap stocks to buy before they explode.
Dessouky noted several strengths and opportunities for the company, particularly in the growing Connected TV advertising market. The analyst highlighted that the company is well-positioned to capitalize on the increasing prevalence of programmatic advertising in the CTV segment, which is a high-growth segment. Its SpringServe platform integrates ad serving with a programmatic layer, offering unique capabilities that are difficult for publishers to replicate internally, thereby reducing the risk of disintermediation. Moreover, the company has achieved significant penetration among major publishers, which positions it to grow revenues in line with publisher ad spend.
During the fiscal fourth quarter of 2024 as well, Magnite, Inc. (NASDAQ:MGNI) pointed toward its focus on expanding its programmatic CTV platform, leveraging partnerships with major players like Netflix, Disney, Roku, LG, and others. It also introduced AI-powered tools to optimize operations and enhance client-facing features. These include generative AI solutions for audience targeting and yield optimization engines for header bidding. Its quarterly revenue reached $668.2 million after growing 8% year-over-year driven primarily by CTV growth.
Crossroads Capital stated the following regarding Magnite, Inc. (NASDAQ:MGNI) in its Q4 2024 investor letter:
“Magnite, Inc. (NASDAQ:MGNI) is the largest independent programmatic Sell-Side Platform (SSP), an entity that provides technology solutions to automate the purchase and sale of digital advertising inventory on behalf of publishers. The company arose from the merger of The Rubicon Project and Telaria in 2020. It then acquired a CTV competitor SpotX in early 2021 to become the third-biggest CTV SSP, after Comcast’s Freewheel and the Darth Vader of the AdTech world, Google. Critically, Magnite stands today as the key enabler of Connected TV advertising for streaming platforms, an increasingly crucial revenue source for media parent companies around the world.
The company’s contract win with Netflix is proof of its differentiation in the space, and was something we expected after hearing back in early 2023 that Microsoft’s Xandr ad tech stack wasn’t capable of true CTV ad delivery. The company has impressive incremental EBITDA margins (75%+), and after spending the last few years consolidating its acquisitions, is in a place to capitalize on growth opportunities, generating cash flow far in excess of current market expectations.
Nonetheless, the company trades on a single-digit multiple of this year’s estimated EBITDA, with minimal credit applied to Netflix onboarding programmatic advertising. That’s strange, if only because the Netflix ad tier is likely to deliver $6 billion in ad spend next year, and half of that may go through Magnite with low-single-digit take rates (3.5 to 5.0%). Should this occur with incremental margins they have shown in the past, the company could see EBITDA rise by over $70 million next year, implying 30%+ growth from Netflix alone. Better yet, with the success of Netflix’s programmatic endeavors, other media customers may accelerate adoption of the same type of programmatic infrastructure/services with MGNI that were previously just tertiary monetization activities…” (Click here to read the full text)
7. Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY)
Market Capitalization: $1.914 Billion
Analyst Upside Potential: 51.87%
Number of Hedge Fund Holders: 26
Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) is a commercial-stage pharmaceutical company specializing in therapies for rare neurological diseases and other conditions with unmet medical needs. Its flagship products include WAKIX, which is a first-in-class molecule designed to enhance histamine signaling in the brain by binding to H3 receptors.
In fiscal 2024, Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) reported $714.7 million in net product revenues, reflecting a 23% year-over-year increase. The fiscal Q4 alone generated $201.3 million, driven by the durable growth of WAKIX. In addition, the company is advancing one of the industry’s most robust CNS pipelines, aiming for one or more product or indication launches annually over the next several years. Its pipeline includes Pitolisant HD, ZYN002, and EPX-100.
Looking ahead, Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) WAKIX to exceed $1 billion in annual revenue before its loss of exclusivity (LOE) in 2030. Moreover, on March 18, Mizuho raised the firm’s price target on the stock to $44 from $42 and kept an Outperform rating on the shares. It is one of the best small cap stocks to buy before they explode.
6. PACS Group, Inc. (NYSE:PACS)
Market Capitalization: $1.755 Billion
Analyst Upside Potential: 101.17%
Number of Hedge Fund Holders: 31
PACS Group, Inc. (NYSE:PACS) is a holding company specializing in investments within the post-acute healthcare sector. It operates a portfolio of independently managed facilities that provide skilled nursing care and other post-acute services. The company oversees approximately 314 post-acute care and senior living facilities across 17 states, serving over 30,000 patients daily.
The company is currently navigating significant challenges due to allegations of Medicare fraud and deceptive billing practices. These claims, originating from a Hindenburg Research report, accuse the company of exploiting Medicare waivers during the COVID-19 pandemic to inflate revenues and create the appearance of growth before its 2024 IPO. CEO Jason Murray has emphasized the company’s commitment to compliance and transparency. PACS Group, Inc. (NYSE:PACS) Audit Committee, with external counsel, is investigating these allegations while cooperating with federal authorities.
Despite these issues, the company highlighted its operational strengths, including high occupancy rates of 90.5% against an industry average of 77% with strong CMS ratings for many facilities. The company also has significant liquidity exceeding $600 million as of Q3 2024. It is one of the best small cap stocks to buy before they explode as analysts expect more than a 101% upside in the next 12 months.
Wasatch Small Cap Growth Strategy stated the following regarding PACS Group, Inc. (NYSE:PACS) in its Q4 2024 investor letter:
“PACS Group, Inc. (NYSE:PACS) was another large detractor. The company’s subsidiaries deliver post-acute health care, assisted living and skilled nursing care services. PACS Group postponed releasing quarterly results after it received civil investigative demands from the federal government regarding the company’s reimbursement and referral practices. Given questions about the business, we decided to move on from the stock and sold our position.”
5. Scorpio Tankers Inc. (NYSE:STNG)
Market Capitalization: $1.96 Billion
Analyst Upside Potential: 72.59%
Number of Hedge Fund Holders: 32
Scorpio Tankers Inc. (NYSE:STNG) is a Monaco-based company specializing in the seaborne transportation of refined petroleum products and crude oil. It operates a fleet of tankers, including LR1, LR2, Handymax, and Medium Range vessels.
On February 17, Evercore ISI analyst Jonathan Chappell maintained a Buy rating on the stock with a price target of $64. During the fiscal fourth quarter of 2024, Scorpio Tankers Inc. (NYSE:STNG) generated $105 million in adjusted EBITDA and $30 million in adjusted net income. Moreover, the company also reduced its debt by $740 million by expanding revolving debt capacity, and lowered daily cash breakevens to $12,500 per day, thereby strengthening the balance sheet.
Looking ahead, Scorpio Tankers Inc. (NYSE:STNG) expects refined product demand to increase by nearly 1 million barrels per day in 2025. It expects 2 million barrels of refining capacity to close this year, as older refineries struggle to compete with newer, cost-efficient facilities in regions like the Middle East and Asia. This shift will lead to increased imports and ton-mile demand as lost production is replaced. It is one of the best small cap stocks to buy before they explode.
4. Disc Medicine, Inc. (NASDAQ:IRON)
Market Capitalization: $1.8 Billion
Analyst Upside Potential: 69.46%
Number of Hedge Fund Holders: 33
Disc Medicine, Inc. (NASDAQ:IRON) is a clinical-stage biopharmaceutical company specializing in the discovery, development, and commercialization of innovative treatments for serious hematologic diseases. It focuses on targeting fundamental biological pathways related to red blood cell biology, including heme biosynthesis and iron homeostasis.
On March 14, Roger Song of Jefferies maintained a Buy rating on the stock with a price target of $111. Song noted that the company is advancing towards important milestones, including the planned submission of a New Drug Application for their lead candidate, Bito, for the treatment of erythropoietic protoporphyria. Moreover, Disc Medicine, Inc.’s (NASDAQ:IRON) regulatory pathway is supported by robust clinical data from previous trials and ongoing studies, which increases confidence in potential approval.
In addition, the company is targeting a significant market, with the addressable patient population for EPP in the US estimated between 6,000 to 14,000 patients, with potential for further expansion. Analysts expect around 69% upside for Disc Medicine, Inc. (NASDAQ:IRON) making it one of the best small cap stocks to buy before they explode.
3. Agios Pharmaceuticals, Inc. (NASDAQ:AGIO)
Market Capitalization: $1.749 Billion
Analyst Upside Potential: 67.13%
Number of Hedge Fund Holders: 33
Agios Pharmaceuticals, Inc. (NASDAQ:AGIO) is a biopharmaceutical company that specializes in the development of transformative therapies for rare genetic diseases, with a strong focus on hemolytic anemias and other genetically defined conditions. It is known for its PYRUKYND, which is a first-in-class pyruvate kinase (PK) activator for adults with PK deficiency, approved as the first disease-modifying therapy for hemolytic anemia.
During the fiscal fourth quarter of 2024, Agios Pharmaceuticals, Inc. (NASDAQ:AGIO) reported that it is leveraging its flagship product, PYRUKYND, to target additional rare diseases. It anticipates regulatory approval for thalassemia in September 2025 and a potential launch for sickle cell disease in 2026. It is also enhancing its pipeline and is progressing its early and mid-stage pipeline, for Tebapivat and AG-236.
In 2024, Agios Pharmaceuticals, Inc. (NASDAQ:AGIO) reported a total revenue of $542.3 million, driven by the success of PYRUKYND and other therapies. The fiscal 2025 is expected to be a transformative year for the company as it expects FDA decisions on PYRUKYND for thalassemia, and phase III results for mitapivat in sickle cell disease. Agios Pharmaceuticals, Inc. (NASDAQ:AGIO) is one of the best small cap stocks to buy before they explode.
2. Travere Therapeutics, Inc. (NASDAQ:TVTX)
Market Capitalization: $1.815 Billion
Analyst Upside Potential: 57.35%
Number of Hedge Fund Holders: 39
Travere Therapeutics, Inc. (NASDAQ:TVTX) is another biopharmaceutical company focused on developing and delivering life-changing therapies for people with rare kidney and metabolic diseases. Its lead product is FILSPARI, which is an FDA-approved, non-immunosuppressive medication for slowing kidney function decline in adults with primary IgA nephropathy. In addition, the company is also developing sparsentan for focal segmental glomerulosclerosis and Pegtibatinase for classical homocystinuria.
On March 19, Leerink Partners analyst Joseph Schwartz maintained a Buy rating on the stock. Schwartz highlighted the submission of a supplemental New Drug Application for Filspari, which can open a significant market opportunity in focal segmental glomerulosclerosis, which is a condition with no approved therapies. This market is estimated to be worth $1 billion, supported by positive Phase 3 DUPLEX and Phase 2 DUET study data.
In addition, Travere Therapeutics, Inc. (NASDAQ:TVTX) reported strong sales figures for Filspari in 2024, surpassing expectations due to robust demand. Net product sales of FILSPARI totaled $50 million in 4Q 2024, reflecting growing adoption. The company ranks as one of the best small cap stocks to buy before they explode.
1. Janux Therapeutics, Inc. (NASDAQ:JANX)
Market Capitalization: $1.773 Billion
Analyst Upside Potential: 152.05%
Number of Hedge Fund Holders: 54
Janux Therapeutics, Inc. (NASDAQ:JANX) is a clinical-stage biopharmaceutical company focused on developing innovative tumor-activated immunotherapies for cancer treatment. It employs two proprietary platforms including Tumor Activated T Cell Engagers and Tumor Activated Immunomodulators. Its pipeline candidates include JANX007 and JANX008.
On March 14, JonesTrading analyst Soumit Roy reiterated a Buy rating on the stock. Roy noted that Janux Therapeutics, Inc.’s (NASDAQ:JANX) masking technology is considered highly promising, with best-in-class data. The company plans to release updated data on its PSMA and EGFR-targeting masked T-cell engagers in 2025, which could further validate its technology.
During the fiscal fourth quarter of 2024, Janux Therapeutics, Inc. (NASDAQ:JANX) presented positive interim Phase 1 clinical trial data for JANX007, metastatic castration-resistant prostate cancer. Notably, 100% of patients achieved PSA50 declines, with deep declines in PSA90 and PSA99. Moreover, the company has a robust cash position of approximately $1.03 billion, supporting ongoing research and development efforts. It is among the best small cap stocks to buy before they explode.
While we acknowledge the potential of Janux Therapeutics, Inc. (NASDAQ:JANX) 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 JANX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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