In this piece, we will take a look at the 12 best nano cap stocks to buy now. If you want to skip our analysis of the current market environment, some nano cap companies doing good work, and want to jump ahead to the top five stocks in this piece, then take a look at 5 Best Nano Cap Stocks To Buy Now.
Even as 2023's first half is over, the uncertainty in the stock market is not. 2023 has been a 'fresh' year when it comes to market performance and it marks another period of topsy turvy performance. The current series of shocks started as the coronavirus pandemic forced global lockdowns and devastated economic activity. Then, the market soared as technology companies saw significant tailwinds from the growth in demand which translated into share price growth. 2022 entered with a potential breather as the severest effects of the pandemic were starting to dissipate, with investors hoping for some respite. However, stimulus induced inflation and the aftermath of the Russian invasion of Ukraine effectively divided the market into two areas - with technology stocks nosediving and energy stocks soaring.
2023 was marked by calls for a slowdown in economic activity and a recession. The reasoning behind this opinion was that the Federal Reserve had increased rates too much to battle inflation, and their effects in the former of tighter credit conditions for both households and businesses would reduce spending in the economy - leading to a slowdown. However, the economy continues to be a tricky player, with the latest data from the Department of Commerce's Bureau of Economic Analysis (BEA) surprising observers. This data shows that the American economy grew by 2% during the first quarter of this year. The BEA releases multiple estimates for GDP growth or contraction for the same quarter with each reflecting improved data collection and measurement. Its previous reading had pegged quarter over quarter GDP growth at 1.3%, leading to a significant increase in the third estimate.
However, the economic growth was not uniform across all segments. Growth was fueled by the private segment, with healthcare, retail, and agriculture growing by 0.61%, 0.57%, and 0.40%, respectively. However, finance and manufacturing contracted by quite a bit, indicating the impact of higher rates in capital and rate sensitive industries.
The data release also led to fears that investors might turn their attention away from the stock market to the bond market. After the Commerce Department released the updated figures, treasury bond yields soared to 3.89% - close to the 4% mark that is believed will encourage bond buying.
With this backdrop, there are countless different stocks that one can invest in. One segment is the nano stock category, which according to official classification are those with a market capitalization of less than $50 million. And, there are some benefits to investing in them as well according to a study from the money management firm O’Shaughnessy Asset Management. Its research shows that between 1964 and 2017, small cap stocks (which also include nano cap stocks) returned 5.5% while large cap stocks actually posted a negative 11% return.
These hints of a higher return from smaller stocks are also indicated in a study of returns of the Russell 1000 index. Analyzing the index's returns in 2020, a period of significant stock market turmoil shows that smaller companies offered 93% returns which were significantly higher than the 58% returns offered by the larger companies traded on the index. Small cap stocks have also seen some academic attention, with a famous study from Eugene Fama and Kenneth French outlining that nano cap stocks should be evaluated according to their market value, size, and excess returns.
Several companies that are classified as nano cap belong to the biotechnology sector. For instance, eFFECTOR Therapeutics, Inc. (NASDAQ:EFTR), which is one of the more valuable nano cap companies is a biotechnology firm. It develops treatments for cancer and June was a good month for the firm as it managed to raise $16.2 million in share sales. This share sale closed a month after eFFECTOR Therapeutics, Inc. (NASDAQ:EFTR) reported that 26% of patients had demonstrated a response in its trial of a cancer medication.
Another important nano cap company, and one which also belongs to a growing industry is Heliogen, Inc. (NYSE:HLGN). Heliogen is focusing on using mirrors to concentrate sunlight to generate heat and subsequently power for industrial and other uses. To make matters even more exciting, its systems use artificial intelligence as well, and it entered into a partnership with a battery company in June 2023 to use its systems for developing a solar powered calcification plant to enable material purification without using excessive energy.
Heliogen's management shared details about the firm's plans during its first quarter of 2023 earnings call, where it outlined:
We are seeing meaningful progress, particularly on those early adopters interested in multiphase projects with the first phase being a single module installation with potential for much larger multi-module expansion opportunities after a successful first phase. We continue to build our backlog through pursuing sales contracts for our industrial steam product, which is Heliogen’s products, commercially ready for adoption today. We’ve established a market-ready spec and plan for this steam unit. However, while we’re excited by the market response, the sales cycle for these commercial scale projects is long, although we must anticipate a significant lag between contract execution and meaningful revenue generation, our strategy of building project backlog will allow us to more swiftly demonstrate our product and generate expanded targets.
With these details in mind, let's take a look at some best nano cap stocks ranked by hedge fund sentiment.
12 Best Nano Cap Stocks To Buy Now
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Our Methodology
To compile our list of the best nano cap stocks, we first made a list of the sixty biggest nano cap companies in terms of market capitalization. Then, the number of hedge funds that had invested in their shares as of March 2023 was determined courtesy of Insider Monkey's database of 943 funds. Out of these, the top 12 nano cap stocks were picked out.
Homology Medicines, Inc. (NASDAQ:FIXX) is a biotechnology firm that develops treatments for genetic disorders such as those involving the liver, the nervous system, and bone marrow. The firm announced in May 2023 that it had successfully managed to stimulate antibody production through its gene therapies.
By the end of this year's first quarter, six out of the 943 hedge funds part of Insider Monkey's database had bought a stake in Homology Medicines, Inc. (NASDAQ:FIXX). Ken Griffin's Citadel Investment Group is the firm's largest shareholder with a $931,255 investment.
Along with Heliogen, Inc. (NYSE:HLGN), PhenomeX Inc. (NASDAQ:CELL), and Bolt Biotherapeutics, Inc. (NASDAQ:BOLT), Homology Medicines, Inc. (NASDAQ:FIXX) is a great nano cap stock.
Regis Corporation (NYSE:RGS) is a services company that operates hair salons. It has more than five thousand owned, franchised, and other establishments in several countries. Amidst a macroeconomic crunch, the firm's revenues for the nine months ending in March 2023 marked a modest 5% annual growth.
Seven of the 943 hedge funds part of Insider Monkey's database had invested in the firm as of Q1 2023. Regis Corporation (NYSE:RGS)'s largest hedge fund investor is Jean-Marie Eveillard's First Eagle Investment Management with a $1.8 million stake.
10. Advanced Emissions Solutions, Inc. (NASDAQ:ADES)
Number of Hedge Fund Investors in Q1 2023: 8
Advanced Emissions Solutions, Inc. (NASDAQ:ADES) provides activated carbon and other products to coal power companies and other firms to remove mercury and other contaminants from their waste products. The firm is headquartered in Greenwood Village, Colorado.
After digging through 943 hedge funds for their March quarter of 2023 shareholdings, Insider Monkey discovered that eight had bought and owned a stake in Advanced Emissions Solutions, Inc. (NASDAQ:ADES). Out of these, Jeremy Carton and Gilbert Li's Alta Fundamental Advisers is the firm's largest shareholder since it owns $3.8 million worth of shares.
Cazoo Group Ltd (NYSE:CZOO) is a car retailer headquartered in the U.K. Despite woes with the British economy, its retail gross profit per unit (GPU) is expected to grow to ￡1,200, for a marked 309% annual growth.
Insider Monkey took a look at 943 hedge funds for their first quarter of 2023 investments to find out that nine had invested in the retailer. Cazoo Group Ltd (NYSE:CZOO)'s largest hedge fund shareholder in our database is Bruce Emery's Greenvale Capital since it owns 2.4 million shares that are worth $6 million.
Polished.com Inc. (NYSE:POL) is an American retailer that sells household goods and products. The firm's high end estimate for revenue in its fiscal year 2022 is slated to sit at $525 million and is expected to drop this year.
Nine of the 943 hedge funds profiled by Insider Monkey had bought Polished.com Inc. (NYSE:POL)'s shares by the end of this year's first quarter. Out of these, its largest investor is Frederick Disanto's Ancora Advisors with a $1.4 million stake.
Gaia, Inc. (NASDAQ:GAIA) is a software company that provides video streaming in languages other than English in the U.S. The firm shook up its executive team in June 2023 when it changed its chief financial and operations officer as well as appointed a new president.
As of March 2023, nine out of the 943 hedge funds part of Insider Monkey's database had bought a stake in the company. Gaia, Inc. (NASDAQ:GAIA)'s largest hedge fund investor in our database is Mubadala Investment's MIC Capital Partners with a $1.9 million investment.
Passage Bio, Inc. (NASDAQ:PASG) is a biotechnology company that develops medicine for nervous system disorders. The company's treatments target Huntington's disease, sclerosis, and Krabbe disease. Its first quarter of 2023 earnings saw Passage Bio, Inc. (NASDAQ:PASG) report sufficient cash to fund operations until mid 2025.
Insider Monkey's Q1 2023 survey covering 943 hedge funds revealed that ten had invested in Passage Bio, Inc. (NASDAQ:PASG). Samuel Isaly's OrbiMed Advisors is its biggest shareholder out of these since it owns a stake worth $8.5 million.
PhenomeX Inc. (NASDAQ:CELL), Passage Bio, Inc. (NASDAQ:PASG), Heliogen, Inc. (NYSE:HLGN), and Bolt Biotherapeutics, Inc. (NASDAQ:BOLT) are some top nano cap stocks.