7 Best Small-Cap Healthcare Stocks to Buy According to Hedge Funds

In this article, we will look at the best small-cap healthcare stocks to buy according to hedge funds. On February 16, Deloitte released its 2026 Global Health Care Outlook, and the findings, drawn from a survey of 180 C-suite executives across major global health systems, paint a picture of an industry under pressure but pushing forward.

The overarching message was that healthcare is undergoing a fundamental transformation, and the organizations that adapt fastest are the ones that will come out ahead. Financial performance is front and center, with over 70% of non-US health executives expecting operating revenues and margins to improve this year, with AI and digital tools playing a growing role in driving those gains.

The survey also revealed that the workforce remains the single biggest concern across the board, with more than 90% of global health leaders citing productivity improvement as a priority. At the same time, cybersecurity has quietly moved from a back-office issue to a boardroom conversation, with nearly half of non-US executives flagging it as a top concern for 2026. The firm highlighted that AI is generating plenty of excitement, but adoption is still in early stages, and health systems are under real pressure to show a return on their investments.

For investors, this is a sector navigating genuine complexity but also one with compelling long-term tailwinds. So, which healthcare stocks are worth watching right now? Let’s explore our 7 Best Small-Cap Healthcare Stocks to Buy According to Hedge Funds.

Our Methodology

To identify relevant stocks for this article, we screened U.S.-listed healthcare companies with market capitalizations between $300 million and $2 billion. Also, we only shortlisted stocks with at least 50% upside potential, according to consensus, as of the March 27 close.

Next, we identified the number of hedge funds that held positions in these stocks by the end of the fourth quarter of 2025. Finally, we selected 7 stocks with the highest number of hedge funds holding stakes and ranked them in ascending order.

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).

7. Inspire Medical Systems Inc. (NYSE:INSP)

Inspire Medical Systems Inc. (NYSE:INSP) is one of the 7 best small-cap healthcare stocks to buy according to hedge funds.

On March 16, Stifel maintained a Buy rating on Inspire Medical Systems Inc.. The firm highlighted that CMS confirmed new HGNS C-codes will be assigned to the same APC 5465 as CPT 64582, keeping hospital facility fees broadly unchanged.

The firm noted that this removes a key downside risk related to reimbursement. However, it added that uncertainty still remains around physician fees and the potential impact of the -52 modifier, pending further guidance from regulators.

On February 27, KeyBanc reported that CMS announced the addition of six new HCPCS codes for the April Integrated Outpatient Code Editor, which will go into effect on January 1st, 2026. These included three codes that describe procedures for Inspire Medical Systems Inc..

The most recent MLN Connects Newsletter also mentioned the recent confusion regarding hypoglossal nerve stimulation reimbursement. The firm claims that, even though it is still early, this move is considered directionally positive because it may help clarify long-term and product-specific payment methods.

Inspire Medical Systems Inc. is engaged in developing and marketing treatments for obstructive sleep apnea (OSA). It provides neurostimulation technology for the secure treatment of mild to severe OSA conditions. The company also delivers closed-loop solutions and mild hypoglossal nerve stimulation to patients.

6. Biohaven Ltd. (NYSE:BHVN)

Biohaven Ltd. (NYSE:BHVN) is one of the 7 best small-cap healthcare stocks to buy according to hedge funds.

On March 11, Ken Cacciatore from TD Cowen increased the price target on Biohaven Ltd. from $15 to $30. The analyst maintained a Buy rating on the stock, which yields an adjusted upside potential of more than 258% at the prevailing level.

Since significant azetukalner data has now clearly validated the Kv7 MoA in focal epilepsy, the analyst has revised his model. He is also encouraged by the prospect of being able to promote the company based on its unique CNS AE profile, which is a positive factor leading up to the topline opakalim data expected mid-year.

On March 10, Goldman Sachs maintained a Buy rating on Biohaven Ltd.. The firm increased its price target from $24 to $27. Goldman Sachs cited positive read-through from strong Phase 3 data reported by Xenon Pharmaceuticals, noting the results support confidence in the broader Kv7 class.

The firm added that the data, along with potential premium pricing versus existing therapies, strengthens the outlook for Biohaven’s pipeline and long-term growth potential.

Biohaven Ltd. focuses on developing and commercializing medicines in the fields of immunology, neuroscience, and oncology. Its clinical stage products include Opakalim, BHV-1300, BHV-1400, BHV-1600, and more. The company also has a strong preclinical product pipeline that includes BHV-1310, BHV- 1320, BHV-1450, and more.

5. Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE)

Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) is one of the 7 best small-cap healthcare stocks to buy according to hedge funds.

On March 12, Ultragenyx Pharmaceutical Inc. announced that the Phase 3 Enh3ance study of DTX301, an experimental AAV8 gene therapy for the treatment of ornithine transcarbamylase deficiency, yielded favourable findings.

DTX301-treated patients showed a statistically significant and clinically meaningful 18% decrease in 24-hour plasma ammonia compared to placebo at Week 36 of the randomised, double-blind, placebo-controlled phase of the trial. Throughout Week 36, the average ammonia AUC0-24 remained within the normal range.

Despite appropriate current medication treatment and dietary restriction, eight out of nine patients with abnormal ammonia AUC0-24 at baseline quickly reached normal ammonia levels, which were often maintained during this treatment period.

On March 12, JPMorgan reduced its price target on Ultragenyx Pharmaceutical Inc. from $120 to $74. The firm maintained an Overweight rating on the shares. JPMorgan noted that current share levels do not reflect meaningful value for key pipeline assets, including GTX-102.

It added that updated estimates also incorporate reduced expectations for setrusumab following a recent setback, while emphasizing that positive clinical data will be important to drive future upside.

Ultragenyx Pharmaceutical Inc. develops novel therapies, with a focus on identifying, acquiring, and commercializing products for rare and ultra-rare genetic diseases. It has a strong emphasis on gene therapy and covers various stages of clinical trials. The company is currently going through high cash burn with the aim of turning profitable from 2027 onwards.

4. Ocular Therapeutix Inc. (NASDAQ:OCUL)

Ocular Therapeutix Inc. (NASDAQ:OCUL) is one of the 7 best small-cap healthcare stocks to buy according to hedge funds.

On March 3, Tazeen Ahmad from Bank of America Securities increased the price target on Ocular Therapeutix Inc. from $24 to $27 while maintaining a Buy rating on the stock. This results in a revised upside potential of more than 257% for investors.

According to Ahmad, a thorough examination of the Phase 3 SOL1 trial results offers compelling evidence in favour of the approval and risk reduction that the diabetic retinopathy program offers through clarifying important questions.

On March 3, Clear Street raised its price target on Ocular Therapeutix Inc. from $21 to $28. The firm maintained its Buy rating on the shares. Clear Street cited positive data from the SOL-1 trial, noting the results support Axpaxli’s potential to deliver durable control in wet AMD.

Clear Street added that the therapy could address a key unmet need around dosing intervals, with strong efficacy and a favorable safety profile supporting a more constructive outlook.

Ocular Therapeutix Inc. focuses on developing and commercializing therapeutics for different eye conditions, including retinal diseases, using its bioresorbable hydrogel-based formulation technology. Its portfolio includes DEXTENZA, AXPAXLI in phase 3 of clinical trial, and OTX-TIC in phase 2 of clinical trial.

3. Soleno Therapeutics Inc. (NASDAQ:SLNO)

Soleno Therapeutics Inc. (NASDAQ:SLNO) is one of the 7 best small-cap healthcare stocks to buy according to hedge funds.

On March 18, Oppenheimer maintained an Outperform rating on Soleno Therapeutics Inc.. The firm reduced its price target from $110 to $80, resulting in a potential upside of more than 166%.

Oppenheimer cited a slower expected U.S. launch ramp and a shift toward a standalone European commercialization strategy. Despite this, it added that its revenue outlook for 2026 remains above consensus, with upcoming catalysts expected to provide support to the shares.

On February 27, Wells Fargo reduced its price target on Soleno Therapeutics Inc. from $114 to $110 while maintaining an Overweight rating on the stock. The firm argues that the shares are cheap based on the value perspective relative to its projected FY2026 revenue and cash flows.

Wells Fargo shared its stance despite some skepticism about comments on building the pipeline and LCM for Vykat XR, as well as the retirement of the CFO, which detracts from the current-period investor takeaway story.

Soleno Therapeutics Inc. is a clinical-stage biopharmaceutical company that is involved in developing novel therapies that target rare diseases like Prader-Willi Syndrome. Its leading product is Diazoxide Choline Extended-Release tablets, VYKAT XR. The company began commercialization of VYKAT XR in April 2025, following FDA approval.

2. Mineralys Therapeutics Inc. (NASDAQ:MLYS)

Mineralys Therapeutics Inc. (NASDAQ:MLYS) is one of the 7 best small-cap healthcare stocks to buy according to hedge funds.

On March 13, Bank of America Securities maintained a Buy rating on Mineralys Therapeutics Inc.. The firm increased its price target to $51 from $46, citing recent updates on the clinical development progress of its lead drug, lorundrostat, following the fourth quarter earnings report.

It added that the therapy’s peak sales opportunity in treating uncontrolled hypertension remains underappreciated, supporting a more constructive view on the company’s long-term potential.

On March 13, Mineralys Therapeutics Inc. Chief Executive Officer Jon Congleton stated that 2025 was a transformative year for Mineralys. The year was marked by significant clinical advancements and important regulatory achievements, as it was able to finish many of the clinical trials.

Congleton highlighted that the results indicate lorundrostat to be of use to people whose hypertension is poorly controlled. He also stated that the company submitted its first NDA for the treatment of adult hypertension at the end of the year, and the FDA’s acceptance of the application marked a significant turning point for the business. This is a significant advancement for Lorundrostat in terms of possible approval and commercialisation.

Mineralys Therapeutics Inc. engages in the development of therapeutics that target illnesses caused by dysregulated aldosterone. It is working on the development of lorundrostat, an aldosterone synthase inhibitor for cardiorenal conditions. These include chronic kidney disease, hypertension, and obstructive sleep apnea.

1. uniQure N.V. (NASDAQ:QURE)

uniQure N.V. (NASDAQ:QURE) is one of the 7 best small-cap healthcare stocks to buy according to hedge funds.

On March 23, Barclays analyst Eliana Merle reduced the price target on uniQure N.V. from $31 to $25. The analyst reaffirmed an Equal Weight rating on the shares, which still offer a potential upside of more than 69% despite the downward revision.

Although the exit of Vinay Prasad from the FDA could have a positive impact, there are still risks associated with the company’s regulation. According to the analyst, a Phase 3 clinical trial for Huntington’s disease will be required for the company.

On March 11, Mizuho increased the firm’s price target on uniQure N.V. from $12 to $35. The firm upgraded the rating from Neutral to Outperform, which currently offers an upside potential of 137%.

Mizuho cited the recent departure of Dr. Vinay Prasad from the U.S. Food and Drug Administration, noting it could signal a more flexible regulatory environment. It added that this shift may reopen a path toward approval based on existing data or alternative trial designs, supporting a more constructive outlook on the shares.

uniQure N.V. is focused on developing therapeutics for patients suffering from rare and deadly diseases. Its product portfolio includes HEMGENIX, AMT-260, AMT-162, and AMT- 130. It targets various medical conditions such as hemophilia B, Huntington’s disease, mesial temporal lobe epilepsy, and more.

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