In this article, we discuss the Best Small-Cap Value Stocks to Buy According to Bares Capital.
Brian Bares is the founder and Chief Investment Officer of Bares Capital Management, an Austin-based investment firm widely recognized for a disciplined, highly concentrated approach to small-cap and micro-cap investing. Since founding the firm in 2000, Bares has distinguished himself by moving away from traditional quantitative screening in favor of deep, qualitative fundamental research. The investment strategy of Bares is rooted in the belief that true value is found in the qualitative moats of a business, factors that standard financial ratios like P/E or P/B often fail to capture.
READ MORE: Billionaire Joe Edelman’s 10 Stock Picks with Huge Upside Potential.
His process prioritizes concentration. Bares typically runs portfolios of only 8 to 12 stocks. He believes that concentrating capital in a handful of extraordinary businesses allows for a depth of knowledge that mitigates risk more effectively than broad diversification. Bares has built his firm to attract long-term institutional allocators, such as non-profit endowments and foundations, who can withstand short-term volatility in exchange for long-term compounding. Unlike many managers who rely on secondary reports, Bares and his team emphasize boots on the ground research. This includes extensive site visits, rental car trips to small-town headquarters, and direct, probing interviews with management teams.
Our Methodology
For this article, we selected stocks by combing through the 13F portfolio of Bares Capital Management at the end of the third quarter of 2025. It is important to note that with climbing valuations, inflation, and years of market growth, the definition of small cap has become more fluid. The selected firms are also popular among hedge funds. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q4 2025 database of 1041 elite hedge funds.
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 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
Best Small-Cap Value Stocks to Buy According to Bares Capital
10. The Middleby Corporation (NASDAQ:MIDD)
Bares Capital Management’s Stake: $7 Million
The Middleby Corporation (NASDAQ:MIDD) is a long-term holding in the 13F portfolio of Bares Capital. The fund first disclosed a stake in the company back in the fourth quarter of 2010. This position comprised just a little over 21,000 shares. By early 2012, the fund had grown this to over 350,000 shares before selling the stake off completely. A new position in the stock was then opened in the third quarter of 2012. This comprised just under 400,000 shares. The fund held onto this stake, growing it slightly, till the end of 2014 before selling it off. Another position was opened in 2018 and closed in 2021. The latest position in the firm was disclosed in the second quarter of 2025. Filings for the third quarter of 2025 show that the fund owned over 54,000 shares in the firm, the same as in the previous quarter.
The Middleby Corporation is attracting interest from elite investors ahead of a planned business separation scheduled for completion soon. The firm is splitting into two independent, publicly traded entities: one focused on Commercial Foodservice and the other on Food Processing. Hedge funds view this as a way to unlock value by eliminating the conglomerate discount. Earlier this year, Middleby completed the sale of a 51% stake in its Residential Kitchen business to 26North for approximately $565 million in cash. This divestiture effectively removed the most volatile segment from the portfolio. The proceeds are being used to fuel one of the most aggressive capital return programs in the industry.
9. Onto Innovation Inc. (NYSE:ONTO)
Bares Capital Management’s Stake: $10 Million
Onto Innovation Inc. (NYSE:ONTO) first appeared in the 13F portfolio of Bares Capital in the third quarter of 2021. Back then, this position comprised 152,000 shares. The fund added to this stake and grew it to more than 220,000 shares by the end of the third quarter of 2022. Thereafter, it started trimming the position. By the second quarter of 2024, this holding had been reduced to just 40,000 shares and was sold off completely by the next quarter. A new position in the stock was then opened in the third quarter of 2025. This consisted of over 75,000 shares. Onto engages in the design, development, manufacture, and support of process control tools that perform macro-defect inspection and metrology in the United States, Taiwan, South Korea, Japan, China, Southeast Asia, Asia, and Europe.
Onto Innovation Inc. is viewed by top investors as a hidden gatekeeper of the high-end AI chip market. While chipmakers like NVIDIA capture the headlines, smart money managers are focused on the specialized inspection tools required to build the complex packaging used in AI data centers. One example of this is the explosive demand for the new Dragonfly G5 inspection platform of Onto. The G5 is uniquely qualified for 2.5D advanced AI packaging, a critical step in manufacturing high-performance AI chips. Earlier this month, management raised their outlook, stating they expect Dragonfly platform demand to grow more than 50% in 2026 compared to 2025.
8. Veeva Systems Inc. (NYSE:VEEV)
Bares Capital Management’s Stake: $22 Million
Veeva Systems Inc. (NYSE:VEEV) first appeared in the 13F portfolio of Bares Capital in the first quarter of 2024. Back then, this position comprised 108,000 shares. The fund steadily added to this stake and by the fourth quarter of 2024, it owned over 130,000 shares in the firm. Thereafter, it started trimming the position. Filings for the third quarter of 2025 show that the fund owned a little over 73,000 shares in the firm, down more than 21% compared to filings for the second quarter of 2025. Veeva provides cloud-based software for the life sciences industry in North America, Europe, the Asia Pacific, the Middle East, Africa, and Latin America. The company offers Veeva Commercial Cloud comprising Veeva Vault CRM Suite for pharmaceutical and biotechnology companies; Veeva Medical that provides source of medical content across multiple channels and geographies.
READ ALSO: 15 Under-the-Radar Picks from David Einhorn That Are Quietly Dominating 2026.
Veeva Systems Inc. is turning heads on Wall Street as it pivots to agentic AI. Unlike generic AI tools, Veeva is integrating industry-specific AI agents directly into the Vault platform. Veeva has already officially released AI Agents for Safety and Quality applications. Because these agents have secure, direct access to the most critical datasets in the industry, like clinical trials and regulatory filings, they provide a level of automation that general-purpose AI cannot match. Institutions view this as a way for Veeva to increase wallet share within existing top 20 biopharma clients without having to significantly increase sales overhead. The firm also recently announced the acquisition of Ostro, a leading brand engagement platform.
7. Globus Medical, Inc. (NYSE:GMED)
Bares Capital Management’s Stake: $30 Million
Globus Medical, Inc. (NYSE:GMED) is a relatively new addition to the 13F portfolio of Bares Capital. Filings for the third quarter of 2025 show that the fund owned over 520,000 shares in the company. Globus develops and commercializes healthcare solutions for patients with musculoskeletal disorders in the United States and internationally. The company offers spine products comprising traditional fusion implants, such as pedicle screw and rod systems, plating systems, intervertebral spacers, and corpectomy devices. It also markets treatment options for motion preservation technologies consisting of dynamic stabilization, total disc replacement, and interspinous distraction devices.
Globus Medical, Inc. is transitioning from a merger integration story to a high-growth surgical powerhouse. After successfully digesting a massive merger with NuVasive, the firm is now demonstrating the scale and profitability that professional investors crave. For example, management has confirmed they are on track to realize the full $170 million in cost synergies by the end of 2025/early 2026. While the industry average for EBITDA margins sits around 24–26%, Globus is pushing toward 33% in 2026. This superior efficiency makes it a top-tier pick for funds focused on industrial and healthcare profitability. The firm is registering record performance in Enabling Technologies, led by the Excelsius robotic platform. Hospitals that purchase an Excelsius robot are essentially locked in to using Globus implants for years.
6. Medpace Holdings, Inc. (NASDAQ:MEDP)
Bares Capital Management’s Stake: $57 Million
Medpace Holdings, Inc. (NASDAQ:MEDP) is a relatively recent addition to the 13F portfolio of Bares Capital. The fund first disclosed a stake in the company back in the first quarter of 2025. This position comprised more than 37,000 shares. The fund added to this stake by over 300% in the next quarter, growing the holding to more than 157,000 shares. Filings for the third quarter of 2025 show that the fund owned 111,000 shares in the firm, down close to 30% compared to filings for the previous quarter. Medpace provides clinical research-based drug and medical device development services in North America, Europe, Asia, South America, Africa, and Australia. The company offers a suite of services supporting the clinical development process from Phase I to Phase IV in various therapeutic areas.
Medpace Holdings, Inc. consistently operates with higher margins than its larger Contract Research Organization peers. In Q1 2026, the company reported a backlog conversion rate of 23.3%, an improvement that signals highly efficient project execution. While other CROs struggle with rising labor costs, Medpace has managed to grow revenue at a much faster rate than its headcount, over 26.5% revenue versus over 5.7% headcount, a productivity alpha that attracts hedge funds focused on operating leverage. The firm also has an attractive capital return program. In 2025, Medpace ramped up share repurchases to $912.9 million, up from just $174 million the previous year.
5. Wayfair Inc. (NYSE:W)
Bares Capital Management’s Stake: $60 Million
Wayfair Inc. (NYSE:W) is a long-term holding in the 13F portfolio of Bares Capital. The fund first disclosed a stake in the company back in the first quarter of 2019. This position comprised a little over 1.5 million shares. By the first quarter of 2021, the fund had grown this holding to more than 4.7 million shares. Thereafter, it started trimming this position, reducing it to over 2.5 million shares by the middle of 2022. Another buying spree was registered after this during which the fund grew this holding to around 5 million shares. Since then, the fund has been trimming the stake. Filings for the third quarter of 2025 show that the fund owned 672,000 shares in the firm, down a little over 8% compared to filings for the previous quarter.
Wayfair Inc. is being targeted by elite investors as the firm has an uncanny ability to capture market share in a wobbly home-goods sector while expanding physical retail footprint. In the most recent earnings cycle, Wayfair signaled a strategic pivot that attracted growth-oriented hedge funds. Management noted a willingness to let gross margins dip slightly below 30% in exchange for faster market share gains. Large institutions often prefer a company that leans in during industry downturns. Funds are betting that by undercutting competitors now, Wayfair will emerge as the dominant, high-scale winner when the housing and furniture markets fully rebound in late 2026.
4. Align Technology, Inc. (NASDAQ:ALGN)
Bares Capital Management’s Stake: $76 Million
Align Technology, Inc. (NASDAQ:ALGN) has consistently featured in the 13F portfolio of Bares Capital since the fourth quarter of 2018. Back then, this position comprised just over 88,000 shares. The fund added to this stake in the coming quarters, growing it to over 1.5 million shares by the first quarter of 2020. A trimming period followed, during which the fund reduced this to around 410,000 shares by early 2022. Another buying spree followed this trough. Filings for the third quarter of 2025 show that the fund owned over 609,000 shares in the firm, up close to 20% compared to filings for the previous quarter.
After a period of soft consumer demand, the Q1 2026 earnings report of Align Technology, Inc. confirmed that the dental giant has successfully returned to growth, led by a surge in international adoption. The firm reported non-GAAP EPS of $2.58, crushing the analyst consensus of $2.30 by 12.1%. Revenue hit $1.04 billion, up 6.2% year-over-year, exceeding projections. Non-GAAP operating margins expanded to 21.5%, proving that the company’s 2025 restructuring efforts are paying off in the form of operating leverage. There is growing bullish momentum on Align’s success in the teen segment, which represents the largest untapped market in orthodontics. Shipments to teens and kids rose 4.8% year-over-year in Q1, led by explosive growth in China and Latin America.
READ ALSO: 15 Safe Stocks to Invest In For Beginners.
3. Etsy, Inc. (NYSE:ETSY)
Bares Capital Management’s Stake: $95 Million
Etsy, Inc. (NYSE:ETSY) has been a constant feature in the 13F portfolio of Bares Capital since the second quarter of 2021. Back then, this holding comprised a little over 400,000 shares. In the coming quarters, the fund steadily built up this stake, taking it to over 4 million shares by the end of 2023. Thereafter, it started trimming this position. Filings for the third quarter of 2025 show that the fund owned 1.4 million shares in the firm, down slightly compared to filings for the second quarter of 2025. Etsy operates online marketplaces that connect buyers and sellers in the United States, the United Kingdom, and internationally.
The primary catalyst for institutional interest in Etsy, Inc. over the past few months has been the sale of Depop to eBay for $1.2 billion, which was finalized in April. Hedge funds are rewarding management for abandoning the House of Brands strategy, which many felt was distracting from the core marketplace. The $1.2 billion in proceeds provides Etsy with a cash pile to reinvest in the core platform and accelerate shareholder returns. Management has already repurchased $145 million of stock in Q1 2026, with over $828 million remaining on the authorization. Following the Depop sale, firms like Bernstein expect Etsy to further accelerate share repurchases, a move that typically provides a strong price floor and appeals to value-oriented hedge funds.
2. CoStar Group, Inc. (NASDAQ:CSGP)
Bares Capital Management’s Stake: $103 Million
CoStar Group, Inc. (NASDAQ:CSGP) is a long-term holding in the 13F portfolio of Bares Capital. The fund first disclosed a stake in the company in the second quarter of 2016. This position comprised a little over 26 million shares. By the second quarter of 2018, the fund had grown this stake to more than 67 million shares. Thereafter, it started trimming the position, reducing it to just under 650,000 shares by the end of 2024. Filings for the third quarter of 2025 show that the fund owned 1.2 million shares in the firm. The company provides information, analytics, and online marketplace services to real estate and related business communities in the United States, Australia, Canada, Europe, the Asia Pacific, and Latin America.
CoStar Group, Inc. is making an aggressive pivot towards profitability. In its Q1 report, the firm doubled its Adjusted EBITDA year-over-year to $132 million, beating its own high-end guidance by $17 million. Management raised its full-year 2026 Adjusted EBITDA guidance to $780 million to $820 million. Hedge funds view this raise as a sign that the company has successfully moved past the peak spending required for its residential expansion. Elite investors are betting on the rapid scaling of Homes.com, which CoStar has positioned as a primary competitor to Zillow. Homes.com revenue grew 58% year-over-year in Q1 2026. The platform added 4,300 new members in the first three months of the year, bringing the total subscriber base to over 35,000.
1. Pegasystems Inc. (NASDAQ:PEGA)
Bares Capital Management’s Stake: $194 Million
Pegasystems Inc. (NASDAQ:PEGA) has been a constant feature in the 13F portfolio of Bares Capital since the third quarter of 2019. Back then, this position comprised just under a million shares. In the coming quarters, the fund started loading up on the stock. By the end of 2023, the fund owned more than 11.7 million shares in the company. Since then, Bares has been trimming the position. Filings for the third quarter of 2025 show that the fund owned 3.3 million shares in the firm, down close to 5% compared to filings for the previous quarter. The company develops, markets, licenses, hosts, and supports enterprise software in the United States, rest of the Americas, the United Kingdom, rest of Europe, the Middle East, Africa, and the Asia-Pacific.
Pegasystems Inc. is being viewed as a pure-play leader in the shift toward autonomous enterprise orchestration. While the company had a mixed Q1 2026 earnings report, professional investors are looking past short-term revenue noise and focusing on the rapid adoption of its AI-native Blueprint architecture. There is a lot of interest around Pega Blueprint, an AI-powered design tool released earlier this year. In the Q1 2026 investor presentation, management revealed that Blueprint has significantly shortened sales cycles and increased the pipeline for new customer wins. Funds see this as a solution to one of Pegasystems’ historical weaknesses, the long implementation time of its software. By automating the application design process with GenAI, Pega is becoming more agile.
READ NEXT: 14 Best Defensive Stocks to Invest In Now and 14 Best Low Risk High Growth Stocks to Buy Right Now.
READ NEXT: 14 Best Defensive Stocks to Invest In Now and 14 Best Low Risk High Growth Stocks to Buy Right Now.
Hedge Fund Resource Center