On February 2, Francis Gannon, co-CIO of Royce Investment Partners, joined CNBC’s “Power Lunch” to talk about the long-awaited upswing in small-cap stocks. He noted that small caps have outperformed large-cap stocks since the market hit its lows in April 2025.
During the discussion, it was noted that sectors such as Industrials, Information Technology, and Financials still offer many attractive small-cap opportunities.
Gannon said that small-cap companies have a strong earnings outlook in 2026. He believes the strong performance by this asset class appears sustainable into 2026 and beyond. His confidence is based on improving earnings prospects for small-cap companies and historical data showing that periods of small-cap outperformance often last around a decade.
Earlier, on January 30, Reuters reported that Eric Diton, president and managing director of The Wealth Alliance, also said that small-cap stocks may be ready to outperform, as their earnings momentum continues to build, after trailing large-cap stocks for years.
With this background in mind, let’s take a look at the 13 best American penny stocks to invest in.
Our Methodology
To compile our list of the 13 best American penny stocks to invest in, we used the Finviz stock screener to find American stocks with a share price of under $5 as of February 20, 2026. We sorted our results based on market capitalization and picked the 40 best American stocks. Next, we focused on the top 13 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2025 database of 978 elite hedge funds. Finally, the 13 best American penny stocks to invest in were ranked in ascending order based on the number of hedge funds holding stakes in them as of Q3 2025.
Why do we care about what hedge funds do? 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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
13 Best American Penny Stocks to Invest In
13. N-able, Inc. (NYSE:NABL)
Share Price: $4.74
Number of Hedge Fund Holders: 23
N-able, Inc. (NYSE:NABL) is one of the best American penny stocks to invest in. On February 20, BMO Capital reduced its price target on N-able, Inc. (NYSE:NABL) from $9.50 to $5.50 and kept its Market Perform rating. This update comes after the company reported Q4 results. N-able, Inc. (NYSE:NABL) beat consensus estimates on most key metrics for the quarter.
The company also provided fiscal 2026 revenue growth guidance in constant currency that was mostly in line with BMO’s expectations. N-able, Inc.’s (NYSE:NABL) management expects revenue growth in fiscal 2026, on a constant currency basis, to accelerate through the year. However, BMO noted some concerns about the assumed contribution from new products. The research firm pointed out that investors are still worried about the defensibility of software solutions for mid-market and small and medium-sized business customers.
On February 20, Needham also lowered its price target on N-able, Inc. (NYSE:NABL) from $10 to $8 and kept its Buy rating. The research firm said it believes the company can execute at a high level as it continues to move up-market and experiences growing traction in extended detection and response solutions.
Needham pointed out that the lower price target reflects broader pressure on valuation multiples across the market.
N-able, Inc. (NYSE:NABL) is an American company that is known for its AI-powered cybersecurity platform that uses advanced end-to-end capabilities, simplified workflows, market-leading integrations, and flexible deployment options to improve efficiency and drive critical security outcomes. It helps protect businesses from evolving cyberthreats.
12. EVgo, Inc. (NASDAQ:EVGO)
Share Price: $2.78
Number of Hedge Fund Holders: 27
EVgo, Inc. (NASDAQ:EVGO) is one of the best American penny stocks to invest in. On February 16, JPMorgan reiterated its Buy rating on EVgo, Inc. (NASDAQ:EVGO) with a price target of $6 on the stock.
In other news, on January 13, EVgo, Inc. (NASDAQ:EVGO) shared its plans to build at least 150 fast charging stalls each year through 2035 at Kroger Family of Stores locations across the United States.
This move expands a partnership with The Kroger Co. (NYSE:KR) that first started in 2022. Under the new expansion plan, select Kroger Family of Stores locations could receive up to 16 high-power fast charging stalls as EVgo, Inc. (NASDAQ:EVGO) aims to offer customers reliable fast charging while they shop.
Under this expanded program, the first new charging site is already operational in Salt Lake City, Utah. EVgo, Inc. (NASDAQ:EVGO) also plans to open additional locations in other states, including Arizona, California, Florida, Georgia, Texas, and Washington.
The company’s chargers are expected to be installed at Kroger Family of Stores brands including Kroger, Foods Co., Fred Meyer, Fry’s Food Stores, Harris Teeter, King Soopers, and Smith’s Food and Drug.
EVgo, Inc. (NASDAQ:EVGO) is an electric vehicle (EV) charging company focused on providing EV charging solutions. With over 1,100 fast charging stations across more than 45 states, it is one of the leading fast charging providers in the US.
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