Hot Penny Stocks For Your November Watch List
Unlike what popular opinion might suggest, penny stocks aren’t just fly-by-night companies to treat like a roulette table bet. These cheap stocks have gained so much attention this year thanks to the 2022 stock market sell-off. In plenty of cases, you might be looking at penny stocks for the simple fact that bearish sentiment took previously higher-priced stocks below the $5 threshold.
But if you’re looking to make money trading, you want to have some sort of edge. Simply finding bottomed-out stocks might not be enough, and data can be your secret weapon. In this article, we’ll talk about a set of data that many retail traders ignore.
Still, it is starting to play a significant role for anyone trying to “follow the money” in certain companies. It’s a continuation of our update “Penny Stocks To Buy: 3 Insider Picks For November 2022,” and we’ll include the complete list of penny stocks with insider buying at the end of this article.
What Is The “Follow The Money” Strategy?
Some traders will use a “Follow The Money” strategy to identify unique opportunities in the stock market today. It’s a simple approach to building a watch list and involves sifting through SEC filings. Most of the time, companies won’t announce when insiders or institutions are building their positions and buying stock.
Their statements must be filed with the SEC and will clearly show what’s happening. That’s where the “devil in the details” matters. So where do you begin if you’re trying to “Follow The Money” and make a watch list? As we said, start by looking at specific filings, and below are a few “go-tos” for finding insider and institutional activity in penny stocks:
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.
Penny Stocks To Buy According To Insiders
Satsuma Pharmaceuticals, Inc. (STSA)
One of the clear examples of how 2022 has turned seemingly established companies on its heads is Satsuma Pharmaceuticals. Up until recently, STSA stock was trading as high as $8. But this month, shares imploded after data came out about its migraine drug STS101. The candidate failed to perform “statistically superior” to the placebo in a Phase 3 trial. As a result, Satsuma decided to explore alternatives instead of continuing commercializing STS101.
Amid a sea of downgrades and price target cuts, there may be something to keep an eye on for potential bullishness. That “something” is insider trading activity. Specifically, one of the company’s 10% owners, Michael Leonard, via BML Investment Partners, purchased over 6.4 million shares of STSA stock last week. Average prices ranged between $0.5913 and $0.75. The total purchases equated to a buying spree worth more than $4.3 million and a 19.4% stake in the company.
In general, no further details have come out from the company that might have prompted this event. However, considering the focus on “exploring alternatives,” it could be a source of speculation for the market, in general.
Cronos Group Inc. (CRON)
Marijuana stocks have been in focus recently thanks to renewed conversations about legislation and the results of the latest midterm elections. Cronos Group has traded within a relatively consistent channel between the $2.65 area and $3.30 area as the 50-day moving average has acted as a pivot and the 200-day moving average acting as resistance.
Other than the technical trend in the stock market, Cronos has maintained more robust revenue growth revealed in its latest earnings results. Cronos posted a loss, but revenue grew during its third quarter. The company also said it was on track to hit $20-$25 million in operating expense savings for the year.
CEO Mike Gorenstein also explained, “We achieved new product launches in the vape category powered by rare cannabinoids like CBG and CBN, and in Israel, we continued to grow the PEACE NATURALS brand with medical patients while expanding our leading position in the country. Looking further ahead, we expect pre-roll innovation to drive our recovery in the category in the fourth quarter and 2023.”
What are CRON stock insiders doing? The most recent purchase came from Director Marc Adler via Gotham Green Fund. Adler purchased over $850,000 worth of CRON at average prices between $2.9289 and $3.165.
Nerdy, Inc. (NRDY)
Another recent earnings play to watch is Nerdy Inc. The company offers an online platform for live learning on over 3,000 subjects in multiple formats. Its flagship business, Varsity Tutors, is one of the largest platforms for online tutoring. With the back-to-school season starting in Q3, Nerdy experienced higher-than-expected revenue and a narrower loss.
CEO and Founder Chuck Cohn explained, “We are pleased to report that the new Learning Memberships business model has exceeded our expectations and validated our underlying assumptions about the favorable customer engagement and unit-level economics. As of September 30th, Learning Memberships has grown to $50M in annualized run-rate revenue. Given our strong results, we remain confident in becoming profitable by the end of 2023.”
Cohn was also a net buyer of NRDY stock in November. Last week, he picked up over 100,000 shares via Rarefied Air Capital at prices ranging from $2.425 to $2.63. That buying spree was worth over $270,000 as Nerdy continues focusing on expanding its subscription model.
Ardelyx, Inc. (ARDX)
Shares of Ardelyx have been on a tear during the second half of 2022. The biotech company has been on the radar for various catalysts, including unusual options activity, social sentiment, and general bullish momentum.
As we said last week, some speculative activity could be linked to a meeting scheduled last week. Ardelyx’s IBSRELA is its first approved product in the U.S. to treat IBS-C in adults. It has additional pipeline candidates that could garner attention this year, including its XPHOZAH for hyperphosphatemia, a chronic kidney disease.
At a meeting of the Cardiovascular and Renal Drugs Advisory Committee, the FDA’s advisors voted nine to four, favoring the risk-benefit profile of Xphozah administered alone to treat high serum phosphorus levels. It also voted ten to two in favor of its risk-benefit profile in combination with a drug known as a phosphate binder.
Following the decision, Director David Mott picked up 567,000 shares of ARDX stock. His average prices ranged from $1.65 to $1.78, bringing his direct holdings to more than 1.16 million shares. The purchases totaled more than $1 million and became one of the reasons for turning a few heads. Remember that ARDX stock has climbed considerably higher in a short period and could open the potential risk of profit-taking. The last 30 days alone have seen the share price rocket from around $1.50 to over $2.15