On August 14, Jonathan Krinsky of BTIG, joined ‘Closing Bell’ on CNBC to discuss whether the recent rally in small cap stocks is sustainable. Krinsky drew a direct comparison of the current situation to that of July 2024, when small-cap stocks were trading flat year-to-date while the NASDAQ was experiencing a strong rally. At that time, a better-than-expected CPI report led to a belief that a September rate cut was impending, which caused the small caps to surge. Krinsky highlighted that 13 months later, the market was in a similar position: small caps were again flat year-to-date, the NASDAQ was performing well, and a recent CPI report had ignited a two-day rally in small caps, with a September rate cut now being fully priced in.

While acknowledging the current breakout, Krinsky questioned its sustainability and suggested that it might be just another momentum unwind similar to what happened in July of the previous year and after the recent election. He cautioned that the breakout needs to hold for more than just a day or two to be considered a lasting trend.

That being said, we’re here with a list of the 9 best small cap stocks with biggest upside potential.

Our Methodology

We first sifted through the Finviz stock screener to compile a list of the top small cap stocks that were trading between $300 million and $2 billion. We then selected the 9 stocks with an upside potential of over 30% as of August 15. The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q1 2025, which was sourced from Insider Monkey’s database.

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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

9 Best Small Cap Stocks with Biggest Upside Potential

9. Acadia Healthcare Company Inc. (NASDAQ:ACHC)

Market Capitalization as of August 15: $1.94 billion

Number of Hedge Fund Holders: 42

Average Upside Potential as of August 15: 31.08%

Acadia Healthcare Company Inc. (NASDAQ:ACHC) is one of the best small cap stocks with biggest upside potential. On August 13, RBC Capital analyst Ben Hendrix lowered the firm’s price target on Acadia Healthcare to $28 from $43, while keeping an Outperform rating on the shares after the company’s Q2 2025 results were announced.

Acadia Healthcare Company reported that its revenue increased by 9.2% year-over-year in Q2 to $869.2 million. This growth was driven by a 9.5% increase in same-facility revenue, which included a 7.5% rise in revenue per patient day and a 1.8% increase in patient days. While net income attributable to Acadia was $30.1 million, or $0.33 per diluted share, this figure was impacted by several one-time items.

Acadia added 101 new licensed beds to existing facilities in this quarter. This brought the total beds added in H1 to 479, which included 288 beds in newly constructed facilities. Additionally, Acadia added 4 new comprehensive treatment centers/CTCs, extending its network to 174 CTCs across 33 states and serving over 74,000 patients daily.

Acadia Healthcare Company Inc. (NASDAQ:ACHC) provides behavioral healthcare services in the US and Puerto Rico.

8. Travere Therapeutics Inc. (NASDAQ:TVTX)

Market Capitalization as of August 15: $1.68 billion

Number of Hedge Fund Holders: 42

Average Upside Potential as of August 15: 70.03%

Travere Therapeutics Inc. (NASDAQ:TVTX) is one of the best small cap stocks with biggest upside potential. On August 10, Citi raised the price target on Travere Therapeutics to $34 from $32, while maintaining a Buy rating on the shares. The firm sees meaningful potential upside for the shares with two near-term FDA action dates for Travere.

Before this decision, Travere Therapeutics reported its Q2 2025 financial results, with a revenue of $114.4 million, up from $54.1 million in Q2 2024. This was driven by a 165% year-over-year growth in US net product sales of FILSPARI, which reached $71.9 million. The company also received a $17.5 million milestone payment from its partner, CSL Vifor, during the quarter.

Earlier in May, the FDA accepted the company’s supplemental new drug application/sNDA for FILSPARI for the treatment of focal segmental glomerulosclerosis/FSGS, setting a PDUFA target action date of January 13, 2026. If approved, FILSPARI would be the first FDA-approved treatment for FSGS. Furthermore, the company expects a PDUFA action date of August 28 this year for its sNDA to modify the FILSPARI REMS (Risk Evaluation and Mitigation Strategy) program, which would remove the embryo-fetal toxicity monitoring requirement and reduce the frequency of liver monitoring.

Travere Therapeutics Inc. (NASDAQ:TVTX) is a biopharmaceutical company that identifies, develops, and delivers therapies to people living with rare kidney and metabolic diseases in the US.