How Do Penny Stock Traders Follow The Money?
If you follow Penny Stocks on Twitter, you already know how much weight we place on data. Whether it’s unusual options data, irregular trading volume data, or financial data, the numbers are what we focus on. One of the ways to find new data is to look at company filings and today we dive into the “follow the money” strategy for finding penny stocks to add to your watch list.
What is this strategy? When you hear about following the money, it generally involves following large buying or selling in companies. This might be done by hedge funds, insiders, or other institutional investors that submit SEC filings showing their larger trades. We’ve even found some instances where government officials have purchased penny stocks.
How To “Follow The Money” Trading Penny Stocks
The easiest way to find big-money bets on penny stocks is to look into the SEC filings. Here are a few of the most frequently referenced when it comes to these types of transactions:
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.
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).”
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” who owns 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.
Read more about filings here: Penny Stocks & Due Diligence: Understanding Important SEC Filings.
An added note is that if you want to find penny stocks government officials are buying, there’s a completely different set of filings to reference. They aren’t as timely as the filing types mentioned above and are more general.
Penny Stocks To Buy [According To Insiders]
- Airsculpt Technologies Inc. (NASDAQ: AIRS)
- WW International Inc. (NASDAQ: WW)
- Porch Group Inc. (NASDAQ: PRCH)
Airsculpt Technologies Inc. (NASDAQ: AIRS)
If you want to talk about volatility, Airsculpt is a shining example of that recently. It has dropped from over $10 to under $2.70, then back above $3.90 within a matter of weeks as investors have digested its latest developments.
The company provides body contouring procedures, and in the wake of a potential recession, some investors have stayed away from cosmetic-focused businesses. This was reflected in its latest quarterly earning report, where Airsculpt missed on sales estimates. It also lowered its 2022 outlook.
“We had a bit more pronounced seasonality during the quarter as several doctors at some of our larger centers took extended vacations, and we expect a number of these cases to be deferred to future periods.”CEO Dr. Aaron Rollins
Amid a slew of analyst target cuts, AIRS stock reached its 52-week lows on Monday. Now, after all of this, is it still one of the penny stocks to watch? According to insiders, they appear to think so. That’s based on recent filings from not only the CEO and CFO but a few directors as well. The largest purchase was made by Dr. Rollins, who bought 150,000 shares at an average price of $3.11. The other purchases were between 15,000 and 33,000 shares at average prices between $3 and $3.09.
WW International Inc. (NASDAQ: WW)
Daily trading volumes have picked up in WW International recently. Also known as WeightWatchers, the company offers weight management programs and has done so for nearly 60 years. Like Airsculpt, WW recently announced its latest brought of results for the third quarter.
Sales of $249.7 million missed estimates of $253.52 million. It also reported a loss per share of $2.93 with expectations of a 2022 loss of between $3.16 and $3.21, accounting for a negative impact from a non-cash impairment charge as well as estimated restructuring charges.
Amy O’Keefe, the Company’s CFO, said, “Adjusted operating income in Q3 was ahead of our expectations, despite continued pressure on revenue from lower subscriber levels year-over-year and headwinds from foreign exchange. We are confident that we are taking appropriate actions to manage costs in this environment and we continue to generate strong cash flow from our subscription model.”
Even with the sea of analyst price target cuts, insiders have appeared optimistic based on recent activity. WW stock has been getting scooped up by Directors this month. Raymond Debbane, Jonas Fajgenbaum, and Denis Kelly all participated. The largest purchase was made by Debbane, worth roughly $320,000. Fajgenbaum was a notable second with a purchase of 29,250 shares at an average price of $4.27.
Porch Group Inc. (NASDAQ: PRCH)
If Porch Group was on your watch list this month, you might’ve noticed a recent uptick in trading volume compared to October. The home services and insurance industry software company has experienced a jump in November thanks to several milestones, including naming a new CFO and authorizing a share buyback program for up to $15 million.
Despite missing earnings estimates for the third quarter, PRCH stock has climbed back from its 52-week lows of $0.94 following the results. News of its latest Porch app raised eyebrows this week after it came to light that the app allows inspectors to offer an interactive method for client management. information in inspection reports. Even with the state of the real estate industry, real estate services and insurance are still a necessity.
Adding to the bullishness, were insiders of the company. COO Matthew Neagle and Director Rachel Lam snatched up shares of PRCH stock this month. The largest purchase came from Neagle, who picked up 315,000 shares at an average price of $1.05. It also brought his position over the 1 million share mark.