Promising Small-Cap Stocks: Opportunities for 2025

The world of small-cap stocks, once overshadowed by large caps, is increasingly coming into the spotlight and promises significant returns by 2025. Greg Tuorto, Portfolio Manager at Goldman Sachs, expressed his confidence in small-cap stocks, particularly in the healthcare and technology sectors, during an interview with Yahoo Finance. Despite a three-year period of weakness, Tuorto sees great potential for small caps, which could benefit from a stabilizing economy. Nancy Prial, Co-CEO at Essex Investment Management, also voiced optimism about the prospects for small caps. In an article on the most undervalued small-cap stocks, she emphasized the opportunities within this asset class. The biotechnology sector, in particular, is drawing attention. According to a Reuters report, several startups are preparing for IPOs that are expected to raise a total of $400 million. Last month, pharmaceutical developers raised over $900 million in their market launches. Biotech companies are poised to capitalize on the current market dynamics rather than waiting for a post-U.S. presidential elections calm. To identify the most interesting small-cap stocks, we utilized the Finviz Stock Screener and selected those particularly popular with hedge funds in the second quarter of 2024. Our researched investment strategy, which aligns with the best hedge fund investments, has achieved an impressive return since May 2014. Akero Therapeutics, a biotechnology company developing drugs for severe metabolic diseases, stands out on our list of the most promising small-cap stocks. Its leading drug, efruxifermin (EFX), could have a significant impact against MASH, a severe form of liver inflammation. Based on promising clinical results, analysts see a price target of $49.50, equating to a 67% potential upside. In conclusion, we rate Akero Therapeutics as an essential player in the small-cap segment, while we continue to believe that AI stocks offer greater potential for faster returns.