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.
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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. (NYSE:INSP). 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. (NYSE:INSP).
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. (NYSE:INSP) 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. (NYSE:BHVN) 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. (NYSE:BHVN). 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. (NYSE:BHVN) 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.
While we acknowledge the potential of BHVN 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 BHVN and that has 100x upside potential, check out our report about the cheapest AI stock.
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