In this article, we will list the 5 best small-cap value stocks to buy according to Bares Capital. Please visit 10 Best Small-Cap Value Stocks to Buy According to Bares Capital if you would like to see the extended list and the methodology behind it.
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. (NYSE:W) 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. (NASDAQ:ALGN) 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.
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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. (NYSE:ETSY) 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. (NASDAQ:CSGP) 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. (NASDAQ:PEGA) 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.
While we acknowledge the potential of PEGA 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 PEGA and that has 100x upside potential, check out our report about the cheapest AI stock.
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