The final quarter of 2025 and first quarter of the new year 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 have underperformed during the current bull market. After all, small caps as an asset class have been a dud. They've struggled to keep up as mega-cap stocks pushed the broader market to record highs.
To recap: the broader S&P 500 is up more than 80% since the bull market's onset three years ago. The tech-heavy Nasdaq Composite more than doubled over the same span. Hurt partly by its price-weighted construction, the blue-chip Dow Jones Industrial Average gained just 55%.
Select Magnificent 7 stocks such as Nvidia (NVDA) and Microsoft (MSFT) have been fueling much of the market's gains. And so small caps – which tend to be more sensitive to the economic cycle, tariffs and interest rates – are lagging badly.
Indeed, the small-cap benchmark Russell 2000 Index is up just 41% over the past three years.
If there is a sliver of a silver lining to the Russell 2000's chronic underperformance, it's that small cap valuations look dirt cheap.
"The broadening of profits growth is finally extending into small caps," notes Jill Carey Hall, an equity and quant strategist at BofA Securities. "Small caps continue to trade at about a 30% historical discount to large caps, implying likelihood of outperformance over the long-term. We remain constructive on small caps for now."
And with the Federal Reserve expected to enact several cuts to the federal funds rate in the coming quarters, small caps should have at least one catalyst behind them.
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 |
|---|---|---|---|
Spyre Therapeutics (SYRE) |
1.14 |
Biotechnology |
Strong Buy |
Denali Therapeutics (DNLI) |
1.16 |
Biotechnology |
Strong Buy |
Waystar Holding (WAY) |
1.19 |
Health Care Technology |
Strong Buy |
Xenon Pharmaceuticals (XENE) |
1.21 |
Biotechnology |
Strong Buy |
Genius Sports (GENI) |
1.22 |
Casinos & Gaming |
Strong Buy |
Janux Therapeutics (JANX) |
1.22 |
Biotechnology |
Strong Buy |
Axsome Therapeutics (AXSM) |
1.25 |
Pharmaceuticals |
Strong Buy |
Wave Life Sciences (WVE) |
1.27 |
Pharmaceuticals |
Strong Buy |
Kymera Therapeutics (KYMR) |
1.27 |
Biotechnology |
Strong Buy |
Riot Platforms (RIOT) |
1.28 |
Application Software |
Strong Buy |
Avidity Biosciences (RNA) |
1.28 |
Biotechnology |
Strong Buy |
Braze (BRZE) |
1.30 |
Application Software |
Strong Buy |
Biohaven (BHVN) |
1.33 |
Biotechnology |
Strong Buy |
Guardant Health (GH) |
1.35 |
Health Care Services |
Strong Buy |
BridgeBio Pharma (BBIO) |
1.37 |
Biotechnology |
Strong Buy |
Essential Properties Realty Trust (EPRT) |
1.37 |
Diversified REITs |
Strong Buy |
Arcellx (ACLX) |
1.39 |
Biotechnology |
Strong Buy |
Privia Health Group (PRVA) |
1.40 |
Health Care Services |
Strong Buy |
IDEAYA Biosciences (IDYA) |
1.42 |
Biotechnology |
Strong Buy |
NetSTREIT (NTST) |
1.50 |
Retail REITs |
Strong Buy |
