Freedom Holding Corp. analytics names five most popular small-cap holdings

Freedom Finance Global has dug up the five small-cap stocks that were most popular among hedge funds at the end of 2024. Three of the companies operate in the IT sector, the most favored with portfolio managers, who allocated more than a quarter of their portfolios to IT names. Another top-five company specializes in fintech, while the last is an oil and gas services firm.

Average weight in hedge fund portfolios: 4.14%

Number of funds holding the name: 83

ProPetro Holding, which provides hydraulic fracturing services to oil and gas companies, accounts for 4.14% of hedge fund portfolios. In the fourth quarter, funds increased their holdings of the stock, says Freedom Finance Global analyst Georgy Timoshin.

In December, portfolio managers at Royce Investment Partners — founded by Wall Street legend Chuck Royce — said ProPetro is “positioned to take advantage of the rise in natural gas based distributed power generation and the consequent demand for natural gas as a commodity in 2025 and beyond.” The primary driver is growing demand for electricity from data centers amid the rise of AI.

Coverage analysts surveyed by MarketWatch have mixed views on ProPetro Holding as an investment. Four have it as a “buy,” while another four rate it as a “hold.” Their average target price is $11 per share, which is 23% above the last closing price.

Average weight in hedge fund portfolios: 4.14%

Number of funds holding the name: 83

AI data center builder Applied Digital shares the top spot with ProPetro Holding, making up about 4.14% of fund managers' portfolios on average. However, in the fourth quarter, funds reduced their positions in the stock, Timoshin notes.

Of note, in the third quarter of 2024, its shares were picked up by one of the world’s most valuable companies — chipmaker Nvidia.

According to MarketWatch, Wall Street analysts have nine “buy” ratings on Applied Digital with no “sells.” Their average target price of $12.44 per share suggests 38% upside versus the last closing price.

Average weight in hedge fund portfolios: 3.94%

Number of funds holding the name: 79

Video hosting and streaming platform Vimeo comes in third, with hedge funds allocating 3.94% of their portfolios to the name on average.

Vimeo stock surged nearly 45% on November 5, after the company reported a 10% increase in net profit for the third quarter. Following the third-quarter earnings, Truist Securities raised its target price for the stock by nearly 29%. A month later, Piper Sandler followed suit with a 43% hike to its target price. However, Vimeo's fourth-quarter earnings disappointed, missing bottom-line expectations by almost 70%. The stock plummeted, and it is down over 22% just since the November 5 rally.

According to MarketWatch, four analysts cover Vimeo. Two have “buy” recommendations, versus two “holds.” The average target price is $8 per share, 50% above current market quotes.

Average weight in hedge fund portfolios: 3.59%

Number of funds holding the name: 72

Fintech small cap Blend Labs accounted for 3.59% of hedge fund portfolios at the end of the fourth quarter, according to the Freedom Finance Global analysis. However, funds were offloading some of their shares late in the year, Timoshin notes.

Blend Labs operates a cloud-based banking platform to help lenders process loans and streamline workflows. The company's primary source of revenue is subscriptions to the platform. Insider Monkey, a financial news and advice site, says Blend Labs is investing in mortgage-related products to “stay ahead of industry trends and meet the evolving needs of its customers,” which explains hedge funds' interest in the stock. In the third quarter, the company achieved non-GAAP operating profitability for the first time in its public history.

Most coverage analysts are optimistic about Blend Labs’ future. According to MarketWatch, the stock has five “buy” ratings and two “hold” ratings. Their average target price is $5.45 per share, implying 53% upside.

Average weight in hedge fund portfolios: 3.15%

Number of funds holding the name: 78

As of the end of 2024, shares of 3D spatial mapping company Matterport accounted for approximately 3.15% of hedge fund portfolios, with its weight increasing in the fourth quarter.

Matterport creates digital twins in real estate, design, construction, sales, and property management. Its stock almost tripled in a single day last year — on April 22, 2024 — when the company announced that all its shares would be acquired by CoStar Group, a real estate analytics company. The offer price was $5.50 per share, though even after the rally, the stock did not reach the $5-per-share mark. The deal has yet to close, even though the parties initially planned to complete it “during the year.” Since then, Matterport has not held earnings calls or provided guidance.

The two Wall Street analysts covering Matterport both have “hold” recommendations, according to MarketWatch. Their average target price of $5.50 matches CoStar Group’s buyout offer and implies 2% upside versus the last closing price.