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.