Core Viewpoint - The article discusses the bullish outlook for small- and mid-cap stocks, highlighting their potential for earnings growth as the market approaches the end of the year, with expectations for a catch-up in performance compared to large-cap stocks driven by favorable market conditions and improved earnings guidance [2][3][4]. Small and Mid-Cap Stocks Outlook - Scott Chronert, Citi's U.S. equity strategist, emphasizes that small and mid-cap stocks are expected to transition from low single-digit earnings growth in 2025 to low double-digit growth in 2026 [3]. - The recent Q3 earnings reports from small-cap companies have shown raised guidance for Q4 and 2026, indicating a positive trend for these stocks [3]. - The small-cap sector is coming off a two-year period of low earnings, which sets a favorable comparison for future growth [3]. Methodology for Stock Selection - The list of the 10 hottest small-cap stocks was compiled using the Finviz Stock Screener, WSJ, Yahoo Finance, and Insider Monkey's Q2 2025 database, focusing on stocks with market capitalizations between $300 million and $2 billion that gained over 50% in the past six months [7]. - Stocks were ranked based on the number of hedge fund holders, indicating interest from institutional investors [7][8]. Featured Small-Cap Stocks - **Aveanna Healthcare Holdings Inc. (NASDAQ:AVAH)**: - Market Capitalization: $1.88 billion - 6-Month Performance: 55.36% - Revenue grew by 22.2% year-over-year to $621.9 million, exceeding analyst expectations [10][12]. - Adjusted EBITDA increased by 67.5% year-over-year to $80.1 million, with management raising full-year revenue guidance to over $2.375 billion [13][14]. - **Spyre Therapeutics, Inc. (NASDAQ:SYRE)**: - Market Capitalization: $1.81 billion - 6-Month Performance: 56.40% - Positive interim Phase 1 results for SPY003, a novel treatment for inflammatory bowel disease, were announced, showing a favorable safety profile [15][16]. - The company is well-positioned financially with a substantial cash runway to support operations until the second half of 2028 [18].