In this article, we will take a look at the 15 Small-Cap Healthcare Stocks Hedge Funds Are Buying.
The U.S. healthcare sector has performed better in 2025 compared to the broader market. After two years of weak performance, the healthcare sector kicked off on a strong note in 2025. In a letter from Federated Hermes, within the S&P 500, the healthcare sector soared nearly 2.59% as of April 30. Whereas the Information Technology sector reported an 11.24% loss, the Consumer Discretionary sector was down 14.08%, and the S&P 500 recorded a 4.92% decline as a whole.
READ ALSO: Why These 15 Healthcare Stocks Are Surging in 2025
As inflation eases, things will be better economically for the healthcare sector. The Investment Director of Federated Hermes, Jordan Stuart, mentioned that when inflation has eased historically, healthcare stocks have performed better. Stuart added:
“Typically, healthcare stocks underperform when inflation is high due to increased costs and pricing pressures. However, inflation has, ever so slowly, begun to decline again, and optimism around rate cuts has resurfaced, giving life back to healthcare stocks. This shift in economic conditions will likely enhance the attractiveness of health care investments, as lower inflation and interest rates create a more favourable environment for growth and profitability.”
According to BlackRock, an average of 75% of healthcare companies exceeded earnings expectations in the first three quarters of 2024. This led to an improved local investor sentiment, with nearly $80 million of inflows to the iShares Global Healthcare ETF (IXJ) in 2024. BlackRock expects the 2025 projected earnings in the healthcare sector to rebound even further, recording the highest year-over-year growth in 18 years, excluding the COVID-19 period.
The U.S. Healthcare Sector Outlook and Tariff Impact
The U.S. healthcare sector now accounts for a fifth of the U.S. economy. With digital transformation, non-acute care shifts, and innovation in biosimilars and speciality drugs, the healthcare sector remains poised for growth in 2025. According to SNS Insider Research, the healthcare market is expected to reach $44.76 trillion in 2032 from $21.22 trillion reported in 2023. This marks a CAGR of 9.07% between 2024 and 2032. North America accounts for almost 44% of the global healthcare market share.
Trump’s tariffs remain a major hurdle for healthcare, and they may threaten around a 10-15% cost increase for drugs and medical devices, as per Forbes. According to the Medical Device Network, around 69% of the U.S.-marketed medical devices are manufactured outside of the U.S.
David Risinger from Leerink Partners highlighted that potential tariffs would likely drive the U.S. drug prices, even though the companies moved their production to the U.S. Reducing costs with domestic production could take years, added Risinger. Reportedly, President Trump is expected to sign an executive order to slash U.S. prescription drug prices. The President plans to match drug prices overseas and control the price hike anticipated by analysts.
Lately, the U.S. government has been striving to make trade deals with its partners. After talks between the U.S. and China, both countries have decided to slash tariffs for 90 days, with duties set to drop by 115 percentage points. This move will drop American tariffs on Chinese goods to as low as 30%, and China’s retaliatory duties will go down from 125% to 10%.
With that, let’s take a look at the 15 Small-Cap Healthcare Stocks Hedge Funds Are Buying.
A close-up of a healthcare professional studying a computer screen with data while consulting with a patient.
Our Methodology
To compile the list of the 15 small-cap healthcare stocks hedge funds are buying, we used the Finviz screener to shortlist healthcare stocks that are trading at a market cap of at least $10 billion. For this article, we are defining small-cap stocks as those that trade between $10 billion and $20 billion. We have ranked the stocks in ascending order of the number of hedge fund holders. Data for the number of hedge fund investors for each stock was taken from Insider Monkey’s database, updated as of Q4 2024. In cases where two or more stocks were held by an equal number of hedge funds, we used the upside potential as a tiebreaker. The analysts’ upside potential data is taken from CNN. Please note that the data was collected on May 13, 2025.
Why are we interested in the stocks that hedge funds and billionaire investors 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).
15 Small-Cap Healthcare Stocks Hedge Funds Are Buying
15. DaVita Inc. (NYSE:DVA)
No. of Hedge Fund Holders: 46
Market Capitalization: $10.99 Billion
Analyst Upside: 18.36%
DaVita Inc. (NYSE:DVA) is a global healthcare company transforming its operations from solely a dialysis provider to offering more comprehensive kidney services. Along with kidney care services, DaVita has established nephrology and payor relationships. The company currently serves more than 281,000 patients.
In 2024, DaVita Inc. (NYSE:DVA) made notable progress with $12.8 billion in revenue and $2.1 billion in operating income, up by 5.6% and 30.4% year-over-year, respectively. The company is expected to benefit from continued strength in its revenue cycle operations during the first quarter of 2025. During Q4 2024, the company confirmed three of four acquisitions in Latin America, with the Brazil deal getting approved in April. The company is progressing in providing sustainable, integrated care through the Integrated Kidney Care business across the region.
During Q1 2025, analysts at Wall Street expect DaVita Inc. (NYSE:DVA) to post revenue of around $3.22 billion, representing 5% growth year-over-year. The earnings are projected to reach $1.75, down by 26.5% from a year ago. The earnings might get hit by the closure of Baxter’s North Cove facility due to Hurricane Helene and the related impact on home dialysis. This led to lower new admits during Q4, and the management expects this to negatively affect volume growth in 2025.
14. ICON Public Limited Company (NASDAQ:ICLR)
No. of Hedge Fund Holders: 46
Market Capitalization: $11.03 Billion
Analyst Upside: 33.74%
ICON Public Limited Company (NASDAQ:ICLR), a Contract Research Organization (CRO), is a healthcare intelligence and clinical research firm. The company offers services to pharmaceutical companies that need to conduct clinical trials. Drug companies outsource ICON’s services instead of conducting complex and costly processes in-house. ICON manages everything from patient recruitment to regulatory compliance.
ICON Public Limited Company (NASDAQ:ICLR) recently posted its Q4 results with its adjusted earnings around $3.19, beating estimates by $0.10 per share. The revenue came in at $2 billion, slightly short of the consensus estimate and a year-over-year decline of 4.6%. The company experienced high levels of cancellations in Q1, impacting overall bookings.
However, on the positive side, the company posted a better-than-expected adjusted EBITDA margin of 19.5%, indicating effective cost control and resource allocation. ICON saw a major increase in overall opportunities in the Biotech segment, with a modest win rate of closing projects. The company’s shift towards increased R&D spending, AI-driven drug discovery, and global diversification of trials reflects a structural growth opportunity. During Q1, the company launched two new AI-enabled tools, iSubmit and SmartDraft. These AI tools will improve operational efficiencies and accelerate clinical trials. In Q1, the company repurchased shares worth $250 million, highlighting its commitment to returning capital to shareholders.
