In this article, we look at the 9 Best Healthcare Penny Stocks to Buy According to Hedge Funds.

Volatility in the equity market has been on another level in the first quarter of the year. While the S&P 500 started the year on a roll, powering to record highs, it pulled back, plunging into correction territory before bouncing back.

The heightened volatility has come amid growing concerns over high valuations, economic growth uncertainty amid the Middle East conflict, and renewed inflationary pressures from a spike in energy prices. Likewise, there has been a rotation away from large-cap tech stocks after years of blockbuster gains.

According to Oppenheimer chief investment strategist John Stoltzfus, what we are seeing in the equity market is a broadening of a playbook.

“What we’re seeing is a rotation, and it’s not necessarily away from technology, as we would think,” he added. “It’s some profit taking to broaden one’s exposure and diversification.”

On the other hand the healthcare sector has been a big disappointment, failing to capitalize on the renewed focus on defensive plays and a rotation away from stocks trading at historical norms. The S&P 500 healthcare sector is already down about 4% for the year, underperforming the broader S&P 500, which is flat.

The sector’s underperformance over the past three years has been shaped by several headwinds, including Covid-19 digestion weighing on earnings growth and policy overhangs compressing valuations. Nevertheless, analysts at JPMorgan believe the sector’s outlook is slowly changing as policy overhang eases.

“Historically over the past 30 years, healthcare has outpaced the broader market in earnings growth. In the last five years, however, the sector has shifted to underperforming the market in terms of earnings growth. The recent stabilization in earnings and guidance from industry leaders suggest the worst may be behind us,” JPMorgan in a research note.

A pickup in merger and acquisition activity is another factor strengthening prospects in the healthcare sector, as companies seek to sustain and grow their revenue pipelines.

While the overall equity market remains under pressure, healthcare penny stocks trading at highly discounted valuations could offer a way out of the current dilemma.

With that in mind, let’s take a look at some of the best healthcare penny stocks to buy according to hedge funds.

Our Methodology

To compile a list of the best healthcare penny stocks to buy according to hedge funds, we used the Finviz screener to scan for healthcare stocks trading for less than $5 a share and with a market cap of more than $500M. We then shortlisted stocks with an upside potential of more than 30% and that are popular among elite hedge funds in Q4 2025. Finally, we ranked the stocks in ascending order by upside potential as of April 12.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research shows 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).

Best Healthcare Penny Stocks to Buy According to Hedge Funds

9. ​Clover Health Investments, Corp. (NASDAQ:CLOV)

Stock Upside Potential: 55.21%

Number of Hedge Fund Holders: 16

Clover Health Investments, Corp. (NASDAQ:CLOV) is one of the best healthcare penny stocks to buy according to hedge funds. On April 7, Clover Health Investments Corp (NASDAQ:CLOV) entered into a strategic partnership with HealthEX.

The partnership paves the way for Clover Medicare Advantage members to securely access and share clinical records and claims data. It also enables patients to advance their rights to access and share their own health data, aligning with Federal interoperability efforts. The strategic partnership builds on recent interoperability with Kno2 and extends member access through infrastructure powered by Counterpart Health.

At the Leerink Global Healthcare Conference 2026, Clover Health affirmed its renewed focus on sustainable growth and profitability. Consequently, it unveiled an AI-powered Medicare Advantage plan showcasing its technological edge and financial aspirations.

Clover Health is targeting 50% revenue growth and hopes to turn in GAAP net income profitability. The company’s solid financial results would come at the back of high member retention of 95%, considered the highest in the market.

Clover Health Investments, Corp. (NASDAQ:CLOV) is a healthcare technology and insurance company that provides Medicare Advantage plans to seniors in 11 states. It uses a proprietary software platform, the Clover Assistant, to provide data-driven insights to physicians, aiming for improved, lower-cost care.

8. SELLAS Life Sciences Group Inc. (NASDAQ:SLS)

Stock Upside Potential: 106.09%

Number of Hedge Fund Holders: 6

Sellas Life Sciences Group Inc. (NASDAQ: SLS) is one of the best healthcare penny stocks to buy according to hedge funds. On March 19, Chief Executive Officer Angelos Stergiou reiterated that 2026 is poised to be a pivotal year for Sellas Life Sciences Group Inc. (NASDAQ:SLS). The remarks align with the significant progress the company is making in its key GPS and SLS009 clinical programs.

The company is moving towards the final analysis of the Phase 3 REGAL trial of GPS in AML patients following second-line salvage therapy. Positive REGAL trial results could position it as the first and best-in-class immunotherapeutic option in this AML population.

Sellas Life Sciences is also making significant progress in developing the SLS009 clinical program for AML. Following positive Phase 2 results in high-risk molecular subtypes, the company has started dosing the first patient in the expansion cohort. Preclinical data in T-PLL demonstrated a statistically significant survival benefit for SLS009 as monotherapy and in combination with venetoclax.

In the first quarter, the company received an additional $42.6 million in proceeds from warrant exercises, further bolstering its reported $71.8 million in cash and cash equivalents as of the end of last year. Consequently, the company remains in a strong financial position to advance the clinical trials.

SELLAS Life Sciences Group Inc. (NASDAQ:SLS) is a late-stage clinical biopharmaceutical company developing novel immunotherapies and targeted therapies for a broad range of cancers. Its core focus is treating hematological malignancies and solid tumors, with lead candidates targeting WT1 antigen overexpression and CDK9 inhibition to improve survival and reduce relapse.