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.
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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.
8. Insperity, Inc. (NYSE:NSP)
Market Cap: $1.89 billion
Beta: 0.48
Number of Hedge Fund Holders: 25
Insperity, Inc. (NYSE:NSP) is one of the best small cap low volatility stocks to invest in. Truist analyst Tobey Sommer lowered the firm’s price target on Insperity, Inc. (NYSE:NSP) to $50 from $70 on August 4, keeping a Hold rating on the shares.
The rating update followed the company’s Q2 miss and guidance cut, which pointed towards the continued Workday expenses and the timing of roll-out, extending the transition period into FY26.
The analyst told investors in a research note that another headwind for Insperity, Inc. (NYSE:NSP) is the benefits costs, resulting in FY25 EBITDA and EPS guidance being lowered.
Insperity, Inc. (NYSE:NSP) provides human resources and business solutions that help enhance business performance. The company also offers employee benefits, payroll and employment administration, government compliance, workers’ compensation, performance management, and more.
7. Premier, Inc. (NASDAQ:PINC)
Market Cap: $1.98 billion
Beta: 0.54
Number of Hedge Fund Holders: 25
Premier, Inc. (NASDAQ:PINC) is one of the best small cap low volatility stocks to invest in. In a report released on June 30, Michael Cherny from Leerink Partners maintained a Hold rating on Premier, Inc. (NASDAQ:PINC) with a price target of $24.00.
The analyst supported the optimistic rating with several factors, including Premier, Inc.’s (NASDAQ:PINC) recent acquisition of IllumiCare. Cherny stated that the acquisition strategically aligns with Premier, Inc.’s (NASDAQ:PINC) goal of enhancing clinical decision support capabilities and operational efficiency.
The analyst added that while the acquisition adds strategic value, he does expect it to add considerably to the company’s financials in the near term.
Other factors expected to have a significantly higher impact on Premier, Inc.’s (NASDAQ:PINC) performance, according to the analyst, include the ongoing renegotiations of the Group Purchasing Organization (GPO) net admin fee share and larger capital deployment.
Premier, Inc. (NASDAQ:PINC) provides healthcare improvement solutions. The company’s operations are divided into the Supply Chain Services and Performance Services segments.
6. Bank of NT Butterfield & Son Ltd. (NYSE:NTB)
Market Cap: $1.86 billion
Beta: 0.61
Number of Hedge Fund Holders: 25
Bank of NT Butterfield & Son Ltd. (NYSE:NTB) is one of the best small cap low volatility stocks to invest in. On July 29, KBW analyst Tim Switzer maintained a Hold rating on Bank of NT Butterfield & Son Ltd. (NYSE:NTB) and set a price target of $50.00.
The rating update came after Bank of NT Butterfield & Son Ltd. (NYSE:NTB) reported its fiscal Q2 2025 earnings on July 28, with net income for the quarter reaching $53.3 million and core net income of $53.7 million, or $1.26 per share.
Management reported a return on average common equity of 20.3% and a core return on average tangible common equity of 22.3%. Bank of NT Butterfield & Son Ltd. (NYSE:NTB) also repurchased 1.1 million shares at an average price of $40.69 per share.
Bank of NT Butterfield & Son Ltd. (NYSE:NTB) provides community banking and wealth management business. The company’s operations are divided into the following geographical segments: Bermuda, the Cayman Islands, Channel Islands and the UK, and Other.
5. Progress Software Corporation (NASDAQ:PRGS)
Market Cap: $1.91 billion
Beta: 0.7
Number of Hedge Fund Holders: 28
Progress Software Corporation (NASDAQ:PRGS) is one of the best small cap low volatility stocks to invest in. Oppenheimer analyst Ittai Kidron maintained a Buy rating on Progress Software Corporation (NASDAQ:PRGS) on July 21, setting a price target of $70.00.
Progress Software Corporation (NASDAQ:PRGS) reported its fiscal Q2 2025 results on June 30, with revenue for the quarter rising to $237 million, experiencing a 36% year-over-year growth on an actual currency basis and 35% growth on a constant currency basis.
Annualized recurring revenue increased 46% year-over-year on a constant currency basis to $838 million, while operating margin was 16%.
Progress Software Corporation (NASDAQ:PRGS) also reported diluted earnings per share of $0.39 in fiscal Q2 2025 compared to $0.37 in the same quarter last year, reflecting a growth of 5%.
Progress Software Corporation (NASDAQ:PRGS) provides products and solutions that develop and deploy mission-critical business applications, including Chef, Corticon, DataDirect, Developer Tools, Flowmon, Kemp LoadMaster, MarkLogic, MOVEit, OpenEdge, Semaphore, and more.
4. O-I Glass, Inc. (NYSE:OI)
Market Cap: $2.04 billion
Beta: 0.93
Number of Hedge Fund Holders: 29
O-I Glass, Inc. (NYSE:OI) is one of the best small cap low volatility stocks to invest in. On August 4, Wells Fargo analyst Gabe Hajde lowered the firm’s price target on O-I Glass, Inc. (NYSE:OI) to $14 from $15 while keeping an Equal Weight rating on the shares.
The firm told investors that O-I Glass, Inc. (NYSE:OI) is exhibiting solid performance on its self-help initiatives, which is supporting growth in profits despite mixed end markets.
Wells Fargo added that the post-earnings stock reaction was a bit harsh, but the firm is waiting for better signs of end-market stability to adopt a constructive view.
O-I Glass, Inc. (NYSE:OI) manufactures glass products, offering them to the food and beverage sector. The company’s operations are divided into the Americas and Europe geographical segments.
3. The Wendy’s Company (NASDAQ:WEN)
Market Cap: $1.93 billion
Beta: 0.31
Number of Hedge Fund Holders: 31
The Wendy’s Company (NASDAQ:WEN) is one of the best small cap low volatility stocks to invest in. On August 11, analyst Rahul Krotthapalli from J.P. Morgan maintained a Buy rating on The Wendy’s Company (NASDAQ:WEN) and set a $13.00 price target.
The analyst based the rating on The Wendy’s Company’s (NASDAQ:WEN) stabilization and the potential improvement in its store economics, factors supported by attractive free cash flow yields.
Krotthapalli sees The Wendy’s Company (NASDAQ:WEN) as a value-oriented opportunity despite a challenging outlook and recent performance, expecting free cash flow yields of 6.6% and 8.4% for fiscal year 2026 and 2027, respectively.
Another key consideration supporting the analyst’s optimistic outlook is The Wendy’s Company’s (NASDAQ:WEN) focus on reducing capital intensity and reallocating funds for faster deleveraging or shareholder returns.
The Wendy’s Company (NASDAQ:WEN) operates, develops, and franchises a system of quick-service restaurants. The company’s operations are divided into the following segments: Wendy’s U.S., Wendy’s International, and Global Real Estate and Development.
2. Teradata Corporation (NYSE:TDC)
Market Cap: $1.95 billion
Beta: 0.83
Number of Hedge Fund Holders: 33
Teradata Corporation (NYSE:TDC) is one of the best small cap low volatility stocks to invest in. On August 6, TD Cowen analyst Derrick Wood lowered the firm’s price target on Teradata Corporation (NYSE:TDC) to $24 from $25, keeping a Hold rating on the shares.
The firm told investors that Teradata Corporation (NYSE:TDC) reported a slight beat in fiscal Q2, reporting an ARR growth of 0%. While the ARR guidance for fiscal year 2025 was unchanged, revenue guidance was lowered due to consulting weakness.
It added that improved execution, in addition to some pull forward from Q3, drove results.
Teradata Corporation (NYSE:TDC) is a cloud data analytics company that engages with a multi-cloud reality and solves data challenges at scale. Its operations are divided into the following geographical segments: Americas, EMEA, and APJ.
1. Central Garden & Pet Company (NASDAQ:CENT)
Market Cap: $2.06 billion
Beta: 0.63
Number of Hedge Fund Holders: 35
Central Garden & Pet Company (NASDAQ:CENT) is one of the best small cap low volatility stocks to invest in. On August 7, Canaccord raised the firm’s price target on Central Garden & Pet Company (NASDAQ:CENT) to $50 from $45, keeping a Buy rating on the shares.
The firm told investors that Central Garden & Pet Company (NASDAQ:CENT) reported mixed Q3 results.
However, it reasoned that profitability was considerably higher than expected, with Central Garden & Pet Company (NASDAQ:CENT) raising its guidance after stating that the quarter is tracking above expectations.
Central Garden & Pet Company (NASDAQ:CENT) engages in the garden and pet industries in the US, with its operations divided into two segments: Pet and Garden.
While we acknowledge the potential of CENT to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than CENT and that has 100x upside potential, check out our report about this cheapest AI stock.
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