Whether you want to invest in penny stocks or just find a few to buy and sell the same day, your strategy matters. Understanding how to trade, manage risk, and implement said strategy goes hand-in-hand with this. So, where should you begin? Today’s article looks at a handful of cheap stocks to buy according to the “Follow The Money” strategy.
Follow The Money Strategy: What It Is & How To Use It
What is the “Follow The Money” strategy? This type of investment approach involves following big money trades in public companies. For this article, we’ll cover penny stocks with insider buying. But, in general, the Follow The Money strategy can include hedge funds and significant shareholders of any company. The first place to look to follow the money is in SEC filings. Here are a few of the types to look at and what they tell you as an investor:
Form 4 Filing
According to the Securities And Exchange Commission, Form 4 is a “statement of changes in beneficial ownership.”
It must get filed with the commission whenever a material change happens in the holdings of a company’s insiders.
Form 3 Filing
Form 3s get filed when someone first becomes an insider. Examples of this include new hires brought on as officers or directors of a company. This Form shows the initial ownership position in the company’s securities and gets filed within ten days of becoming an insider.
Schedule 13D, Schedule 13G, and Schedule 13F Filings
These Schedules involve parties reporting ownership of stock over 5% of a particular equity class in a company. The SEC defines Schedules 13D and 13G as beneficial ownership reports: “The term ‘beneficial owner’ is defined under SEC rules. It includes any person who shares voting or investment power directly or indirectly (the power to sell the security).”[Read More] 4 Hot Penny Stocks To Buy Now According To Top Hedge Funds
These filings would be highlighted by traders looking for “Whale” trades as they generally connect to large funds or investment trusts.
- A Schedule 13D gets filed by an “active investor” and one owning more than 20% of a company’s outstanding shares.
- A 13G pertains to “passive investors” owning less than 20% of a company’s outstanding shares. Once a “passive investor” reaches over 20% of the OS, they must start filing 13D statements. These are important because we’ll see which large funds or investors are taking a more significant position in a company. These typically lift sentiment for a given company.
- Schedule 13F filings are where things get fun. 13Fs are quarterly reports required to be filed by institutional investment managers with at least $100 million in assets under management.
You can read more about filings in the article Penny Stocks & Due Diligence: Understanding Important SEC Filings.
All of these filings carry different levels of importance to different traders. Today, we look at penny stocks with insider buying, so Form 4s will be the flavor of the day for our “Follow The Money” strategy.
Penny Stocks To Buy [according to insiders]
- Comera Life Sciences Holdings (NASDAQ: CMRA)
- Canoo Inc. (NASDAQ: GOEV)
- Reliance Global Group Inc. (NASDAQ: RELI)
Comera Life Sciences Holdings (NASDAQ: CMRA)
Look at any CMRA stock chart, and you will likely see a sporadically-traded penny stock. Since making its public debut in May, volatility has become a significant part of the market’s 2022 trading trend. It’s interesting to note that each month since its IPO, Comera experiences a period of about a week where shares see action. First, in mid-June, then late-July, briefly in late August, and now, this week has been the most active for September. Whether you subscribe to things like this or not, it is secondary to what’s happening with Comera Life Sciences.
The company develops “bio-innovative” medicines specifically targeting the self-injectable care market. Late last month, Comera announced an up to $15 million purchase agreement with Arena Business Solutions to buy CMRA stock. CEO Jeffrey Hackman explained, “The line of credit provides the opportunity to invest in our pipeline and proprietary formulation platform, SQore™, which is designed to transform intravenous biologics into subcutaneous versions that patients can self-administer in a single dose.”
But what has become an even more significant catalyst for the penny stock is based on insider activity. Directors and management purchased shares of CMRA stock between September 9th and 12th, totaling more than 122,000 shares at average prices ranging between $1.93 and $2.13. Insider purchases from multiple insiders have brought more upbeat sentiment to the company in the stock market this week.[Read More] Best Penny Stocks To Buy? 4 To Watch After HKD Stock Explodes
Canoo Inc. (NASDAQ: GOEV)
The electric vehicle start-up Canoo Inc. is no stranger to big moves in the stock market. In early July, shares of GOEV stock surged from 52-week lows of $1.75 to highs of $5. This upper level seems to have been a clear resistance level after GOEV stock couldn’t break above it on multiple occasions.
Its roster of deal flow includes organizations like NASA, the U.S. Army, and even grocery chain Walmart to name a few. Its latest deal with Walmart, in particular, will see the company completing advanced deliveries to finalize a custom-configured vehicle for the company. CEO Tony Aquila explained in an August update, “Our LDV has been engineered to enable a wide range of package deliveries, including refrigerated items, groceries, and general merchandise – and do it efficiently, emission-free, and with a high level of driver comfort and ergonomics. And we have been turning a lot of heads in the neighborhoods when driving by in our uniquely identifiable vehicles.”
But Aquila is in the spotlight for something else right now. That “something” is his latest insider trading activity in GOEV stock. This week, the CEO filed a Form 4 showing the purchase of another 200,000 shares at prices ranging from $2.54 to $2.68 and were purchased under a trading plan adopted by Aquila in June. His investment added to his August purchase of 200,000 shares of GOEV stock.
Thanks to this latest trade, GOEV stock has found itself on the list of Follow The Money stocks to watch right now.
Reliance Global Group Inc. (NASDAQ: RELI)
The AI technology-based insurance company Reliance Global has quietly mounted a 44% comeback over the last few weeks. This move comes after months of a slow bleed down to 52-week lows of $0.6802 from highs of over $10 earlier in the year. Reliance and other insurance stocks have come under pressure from the rest of the market.[Read More] These Short Squeeze Penny Stocks Are Exploding This Week, Time To Buy?
In the case of Reliance, the company has worked on establishing new partnerships to extend its revenue model further. The latest collaboration comes from a referral agreement with NRS Funding. The two will leverage Reliance’s RELI Exchange network to offer clients merchant cash advance services. Management hopes this latest affiliation will be accretive to its current revenue model.
Last quarter, the company achieved a 92% increase in revenue, with sales jumping from $2.19 million to $4.2 million; 2021 vs 2022. But it’s more than financial performance that turned heads toward RELI stock recently. September has been a very active month for insiders, specifically company CEO Ezra Beyman. His latest purchase was for over 200,000 shares in trading activity worth nearly $200,000. This brought his holdings to more than 4.8 million shares.