The second half of 2025 could be much more favorable for stockpickers looking for the best small-cap stocks to buy.
That might sound counterintuitive after the way small caps performed through the first half of the year. After all, small caps as an asset class have been a dud. They went nowhere as mega-cap stocks pushed the broader market to record highs.
To recap: the broader S&P 500 gained almost 8.6% on a price basis through early August, while the tech-heavy Nasdaq Composite rose more than 11%. The blue-chip Dow Jones Industrial Average rose just 3.4%, hurt partly by its price-weighted construction.
But while select Magnificent 7 stocks such as Nvidia (NVDA) and Microsoft (MSFT) helped drive the market's gains, small caps – which tend to be more sensitive to the economic cycle and interest rates – traded sideways.
Indeed, the small-cap benchmark Russell 2000 Index – struggling to stay positive for months – was slightly negative through the first eight months of the year.
If there is a sliver of a silver lining to the Russell 2000's underperformance, it's that small caps are now trading at bargain basement prices.
"As the premium on large caps continues to expand, small-cap equities become increasingly attractive on a relative basis," writes Jeff Buchbinder, chief equity strategist for LPL Financial. "Their lower valuations may signal undiscovered value or underappreciated growth potential, particularly in sectors poised to benefit from domestic policy tailwinds."
And with the Federal Reserve expected to enact several incremental cuts to the federal funds rate before year-end, small caps should have at least one catalyst on the horizon.
Our methodology for finding the best small-caps stocks to buy
In order to find the best small-cap stocks to buy now, we started by screening the Russell 2000 for Wall Street analysts' top-rated names.
Here's how the process works: S&P Global Market Intelligence surveys analysts' stock ratings and scores them on a five-point scale, where 1.0 equals Strong Buy and 5.0 means Strong Sell.
Any score of 2.5 or lower means that analysts, on average, rate the stock a Buy. The closer the score gets to 1.0, the stronger the Buy call.
In other words, lower scores are better than higher scores.
We further limited ourselves to stocks with at least 12 Strong Buy recommendations to ensure adequate analyst coverage and sample size. Lastly, we dug into research, fundamental factors, valuation, analysts' estimates and other data to find the best stocks to buy.
Our screen of the Street's top small-cap stocks served up a list dominated by the health care sector, mostly pharmaceutical and biotechnology companies.
That's to be expected, and investors should always do their own due diligence when considering, say, a clinical-stage biotech firm, which is essentially a speculative investment.
In other cases, some of these names – a gaming stock and real estate investment trust (REIT), for instance – might just surprise you.
And with that, have a look at the table below to see Wall Street's best small-cap stocks to buy now.
Company (Ticker) |
Analysts' consensus recommendation score |
Subsector |
Analysts' consensus recommendation |
|---|---|---|---|
Waystar Holding (WAY) |
1.14 |
Health care software |
Strong Buy |
Kymera Therapeutics (KYMR) |
1.20 |
Biotechnology |
Strong Buy |
Denali Therapeutics (DNLI) |
1.21 |
Biotechnology |
Strong Buy |
Genius Sports (GENI) |
1.24 |
Casinos and gaming |
Strong Buy |
Axsome Therapeutics (AXSM) |
1.26 |
Pharmaceuticals |
Strong Buy |
Xenon Pharmaceuticals (XENE) |
1.26 |
Biotechnology |
Strong Buy |
Avidity Biosciences (RNA) |
1.28 |
Biotechnology |
Strong Buy |
Wave Life Sciences (WVE). |
1.31 |
Pharmaceuticals |
Strong Buy |
Arcellx (ACLX) |
1.32 |
Biotechnology |
Strong Buy |
Privia Health Group (PRVA) |
1.38 |
Health care services |
Strong Buy |
BridgeBio Pharma (BBIO) |
1.41 |
Biotechnology |
Strong Buy |
Guardant Health (GH) |
1.42 |
Health care services |
Strong Buy |
Essential Properties Realty Trust (EPRT) |
1.50 |
Diversified REIT |
Strong Buy |
