Top Performing Small-Scale Corporate Shares Worth Investing in Immediately
Small-Cap Stocks Shine as Wall Street Favourites for the Second Half of 2025
As the second half of 2025 approaches, small-cap stocks are gaining traction among investors, with many analysts predicting a more favourable environment for stockpickers. This shift away from the tech giants towards small-cap stocks is driven by expectations of rate cuts and improving market conditions.
Wall Street analysts have been quick to recommend several small-cap stocks, with a number of them standing out as top picks. Here are some of the highly recommended small-cap stocks:
Top-Rated Small-Cap Stocks
- Axsome Therapeutics (AXSM) - A pharmaceutical company with a strong pipeline of innovative treatments, currently rated as a Strong Buy.
- Xenon Pharmaceuticals (XENE) - A biotechnology company known for its development of novel therapeutics, also rated as a Strong Buy.
- Waystar Holding (WAY) - A healthcare software company providing technology solutions, also rated as a Strong Buy.
- Kymera Therapeutics (KYMR) - A biotechnology company specialising in developing targeted protein degraders, rated as a Strong Buy.
- Arrowhead Pharmaceuticals (ARWR) - A biotechnology company that has recently gained momentum with positive analyst upgrades, rated as a Buy.
- Chemours (CC) and Hillenbrand (HI) - Both companies in the diversified chemicals and industrial manufacturing sectors, respectively, have seen significant gains and analyst interest recently, also rated as Buy.
Performance Standouts
The performance of small-cap stocks has been impressive, with Regencell Bioscience Holdings Ltd (RGC) leading the pack with a one-year return of 5223.24%. Other notable performers include Bright Minds Biosciences Inc (DRUG) and Quantum Computing Inc (QUBT).
Considerations
Investing in small-cap stocks offers higher potential for growth but comes with higher volatility risks. The tech-heavy Nasdaq Composite rose more than 11% through early August, while the broader S&P 500 gained almost 8.6%. However, small caps are trading at bargain basement prices due to their underperformance.
The Federal Reserve is expected to enact several incremental cuts to the federal funds rate before year-end, which could be a catalyst for small caps. The small-cap benchmark Russell 2000 Index was slightly negative through the first eight months of the year.
The screening process for finding the best small-cap stocks involves analyzing stocks with the highest number of Strong Buy recommendations from Wall Street analysts. Some of the top small-cap stocks identified include Waystar Holding (WAY), Kymera Therapeutics (KYMR), Denali Therapeutics (DNLI), Genius Sports (GENI), Axsome Therapeutics (AXSM), Xenon Pharmaceuticals (XENE), Avidity Biosciences (RNA), Wave Life Sciences (WVE), Arcellx (ACLX), Privia Health Group (PRVA), BridgeBio Pharma (BBIO), Guardant Health (GH), and Essential Properties Realty Trust (EPRT).
Jeff Buchbinder, chief equity strategist for LPL Financial, suggests that small-cap equities become increasingly attractive due to their lower valuations. The health care services sector also has several strong buy recommendations, such as Privia Health Group (PRVA) and Guardant Health (GH). The gaming sector is represented by Genius Sports (GENI) in the list of top small-cap stocks.
There may be domestic policy tailwinds that could benefit sectors of small caps. Any score of 2.5 or lower means that analysts, on average, rate the stock a Buy. The list of top small-cap stocks generated by this screening process is dominated by the health care sector, particularly pharmaceutical and biotechnology companies.
The blue-chip Dow Jones Industrial Average rose just 3.4% through early August. This underscores the potential for higher returns in small-cap stocks compared to the larger, more established companies. As the second half of 2025 approaches, small-cap stocks are shaping up to be a compelling investment opportunity for those seeking undiscovered value or underappreciated growth potential.
Finance experts have been keen on trading small-cap stocks, such as Axsome Therapeutics (AXSM), Xenon Pharmaceuticals (XENE), and Waystar Holding (WAY), as Wall Street's consensus favors these stocks heading into the second half of 2025. Investing in such stocks, while offering higher potential for growth, comes with higher volatility risks, but their lower valuations make them attractive, especially with the Federal Reserve's anticipated rate cuts.
