Penny stocks are often characterized by their high volatility. Their low price means that even small price changes can equate to significant percentage gains or losses. For instance, a $0.50 increase on a $1 stock equates to a 50% return. This potential for rapid and substantial gains is part of the allure of penny stocks.
It’s good to understand that investing in cheap stocks is not without risks. These stocks can be subject to price manipulation and lack the liquidity of larger, more established stocks. Furthermore, information about low-priced companies can be scarce, making it more challenging for investors to conduct thorough due diligence. As such, while penny stocks can offer substantial returns, they are also associated with a high risk of loss.
Insider Buying: A Key Indicator for Penny Stocks?
Legal insider buying refers to the purchase of shares in a company by a company insider who may have access to non-public, material information about the company. This could include executives, directors, employees, or significant shareholders. When these insiders buy shares in their own companies, it can signal confidence in its prospects.
For investors, tracking insider buying can provide valuable insights. If insiders buy shares, it could indicate that they believe the company’s stock is undervalued and poised for growth. This can be particularly relevant in penny stocks, where information can be limited, and price swings can be dramatic.
However, it’s important to note that while insider buying can provide valuable insights, it should not be the sole basis for investment decisions. Due diligence is essential when investing in penny stocks. This includes thoroughly analyzing the company’s financials, understanding its business model, and assessing its competitive position.
Insider buying can be a valuable tool for investors in the penny stock market. By staying informed and understanding these dynamics, investors can navigate the market landscape more effectively and potentially uncover hidden opportunities in the stock market today. This article looks at a handful of penny stocks to watch that saw increased insider activity in June. Is it a signal for retail to buy, or should these be avoided entirely? That’s something I’ll leave to you to decide.
Penny Stocks To Buy [according to Insiders]
ImmunityBio Inc. (IBRX)
Share prices for ImmunityBio exploded in April and early May thanks to speculation arising from a pending Biologics License Application outcome. Ultimately, ImmunityBio received a complete response letter from the FDA regarding the BLA for its Anktiva. The FDA could not approve the application in its present form. Clearly, the market reacted in kind, with shares freefalling.
Fast-forward to this month, and things have continued recovering. The company is slated to present at this week’s Jefferies Global Healthcare Conference. Plans are for its Chief Scientific and Medical Officer to participate in a fireside chat. Following the FDA’s decision, attention may be heavily focused on what’s next for the biotech company.
The company’s invasive bladder cancer treatment candidate could be at the center of interest. Furthermore, details highlighted the May decision that the FDA didn’t request any new studies or Phase 3 clinical trials. Plans are to meet with the Agency to address issues and decide on a response timeline.
Despite this potential setback, the company has said it remains in contact with a large biopharmaceutical company to commercialize Anktiva. Hopes are to complete a transaction this year, according to a May 8-K filing. In addition, insiders have begun scooping up shares of IBRX stock. Directors Michael Blaszyk, John Brennan, and Wesley Clark collectively purchased over 100,000 shares, with Blaszyk taking the bulk of that, purchasing 71,915 at an average price of $2.75.
Globalstar Inc. (GSAT)
Shares of Globalstar stock have steadily risen over the last month. Despite some volatility during the period, shares have climbed over 40% since May 2nd. Some of the attention stemmed from earnings-related catalysts. The company beat sales expectations during the quarter. Meanwhile, EBITDA increased more than 200% with a 56% margin.
Dave Kagan, Chief Executive Officer of Globalstar, explained, “In addition to record financial growth and as highlighted in this release, we continue to execute along our four pillars – wholesale, legacy, IoT and terrestrial spectrum – which together make Globalstar a disruptive player in our industry.”
Globalstar expects to reach $185 million to $230 million in revenue this year. Meanwhile, anticipation for Adjusted EBITDA margin remains at roughly 55%. By 2026, Globalstar expects total revenues to climb another 35% compared to 2023 thanks to new satellites in operation. Adding to the excitement, there has been more buying in GSAT stock by company director and 10% owner James Monroe. He snagged over 5 million shares in May and added another 531,392 this month via Thermo Properties II, LLC. The average prices paid range from $1.10 to $1.20.
Lexicon Pharmaceuticals (LXRX)
Though Lexicon shares have slumped recently, that hasn’t taken away from the interests thanks to insider trading activity in the penny stock. Lexicon specializes in gene targeting, including the discovery and development of medicines to treat various diseases. Treatments have a wide range of focus, including heart failure, neuropathic pain, diabetes, and metabolism indications.
Late last month, Lexicon announced FDA approval of its INPEFA for treating heart failure. “The approval of INPEFA along with the breadth of the label, is a major milestone in Lexicon’s path to fulfilling its mission of pioneering medicines that transform patients’ lives,” said Lonnel Coats, Lexicon’s chief executive officer. “We expect this important innovation to be commercially available in the U.S. market by the end of June 2023.”
The company also announced a $125 million financing round, which sent shares plummeting during recent sessions. However, after the funding’s close, attention is refocusing on the company and its insiders. In particular, the latest disclosure from Director/10% owner Artal International showed the firm to a significant portion of that financing round. Artal reported purchasing more than 27.77 million shares at the $2.60 offering price. This increased its stake to over 117 million shares in a transaction valued at more than $72 million.
Diversified Healthcare Trust (DHC)
Diversified Healthcare is a real estate investment trust (REIT) focusing on healthcare properties in the US. Looking at any DHC stock chart, you’ll notice a significant move since the beginning of May. Notable earnings results for the first quarter of this year have aided this. It’s also helped by recent insider trading activity and speculation on a pending merger.
Director Adam D Portnoy recently purchased a total of 3,154,641 shares at an average price of $1.38. The trade totaled more than $4.3 million.
Regarding the merger, this week, Flat Footed LLC, a top shareholder of DHC stock, called on the company’s board to address, among other things, a proposed merger with Office Properties Income Trust (NASDAQ: OPI). Flat Footed wants Diversified Healthcare to reject the merger.