In this article, we will look at the 10 Best Small Cap Low Volatility Stocks to Invest In.
On August 12, Jill Carey Hill, BofA Securities head of U.S. small/mid-cap strategy, appeared on CNBC’s ‘The Exchange’ to talk about the outlook for small caps and why she doesn’t believe the market will get a rate cut from the Fed this year.
Data from the Bank of America Fund Manager Survey showed that 44% of the survey takers believed that small caps will outperform large caps this year, which is a rise from the previous reading.
Hill, however, stated that there are a number of reasons why small caps could continue to lag, shedding light on her cautious stance on the Russell 2000. She believes that some of those reasons still hold in the near term, with tariffs being one of them. Small caps earnings have seen a bigger impact from tariffs because of their thinner margins.
READ ALSO: 10 Best NYSE Stocks to Buy Under $20 and 12 Best Medical Device Stocks to Buy According to Analysts.
Another reason is the Fed, as she does not expect the Fed to cut this year. According to her, cuts may begin in 2026, which may act as a downside surprise for the Russell 2000.
She added that a more dovish Fed this year “could help spur a rally in small caps.” However, Hill clarified that in case rate cuts come due to a deterioration in economic data, the conditions would not be positive for small caps.
With these trends in view, let’s look at the best small cap low volatility stocks to invest in now.
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Our Methodology
We used Finviz to compile a list of small cap stocks (stocks with a market cap between $300 million and $2 billion) and a beta below 1 and selected the top 10 with the highest number of hedge fund holders as of Q1 2025, sourcing the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
Note: All data was recorded on August 12.
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 Low Volatility Stocks to Invest In
10. Skyward Specialty Insurance Group Inc. (NASDAQ:SKWD)
Market Cap: $1.99 billion
Beta: 0.61
Number of Hedge Fund Holders: 23
Skyward Specialty Insurance Group Inc. (NASDAQ:SKWD) is one of the best small cap low volatility stocks to invest in. On August 1, Piper Sandler lowered the firm’s price target on Skyward Specialty Insurance Group Inc. (NASDAQ:SKWD) to $59 from $69, keeping an Overweight rating on the shares.
The rating update came after Skyward Specialty Insurance Group Inc. (NASDAQ:SKWD) reported its fiscal Q2 2025 results on July 30.
The firm told investors that the top-line slowdown in recent quarters posed an issue for some investors. However, results from this quarter led it to believe that the rise in growth last year was not an anomaly.
Skyward Specialty Insurance Group Inc. (NASDAQ:SKWD) reported $38.8 million in net income for fiscal Q2 2025, or $0.93 per diluted share, compared to $31.0 million in the same quarter last year. Net income for H1 2025 reached $80.9 million, up from $67.8 million for the same 2024 period.
Skyward Specialty Insurance Group Inc. (NASDAQ:SKWD) is a specialty insurance company that provides commercial property and casualty (P&C) solutions and products on an admitted and non-admitted basis, predominantly in the US.
It specializes in industry solutions, healthcare professional liability, medical stop-loss, management and professional liability, specialty property and liability, programs and captive solutions, and surety.
The company’s operations are divided into eight divisions: Accident & Health, Captives, Global Property and Agriculture, Industry Solutions, Professional Lines, Programs, Surety, and Transactional E&S.
9. HNI Corporation (NYSE:HNI)
Market Cap: $2.0 billion
Beta: 0.93
Number of Hedge Fund Holders: 24
HNI Corporation (NYSE:HNI) is one of the best small cap low volatility stocks to invest in. On August 5, Benchmark Co. analyst Reuben Garner maintained a Buy rating on HNI Corporation (NYSE:HNI) and set a price target of $60.00.
The rating update came after HNI Corporation (NYSE:HNI) announced on August 4 that it entered into a definitive agreement with Steelcase Inc. Under the terms of the agreement, HNI Corporation (NYSE:HNI) would acquire Steelcase in a “cash and stock transaction, with a total consideration of approximately $2.2 billion to Steelcase common shareholders”.
HNI Corporation (NYSE:HNI) provides workplace furnishings and residential building products. Its operations are divided into the Residential Building Products and Workplace Furnishing segments.
The company’s brand portfolio includes Beyond, HON, Kimball, HBF Textiles, HNI India, and more.
Through its export subsidiary, HNI Corporation (NYSE:HNI) exports certain products to North America, principally Latin America, the Caribbean, and Mexico.
