Penny stocks are an interesting asset class when it comes to making money in the stock market. Their inherent risk/reward makeup lends to heavy speculation and a thirst for significant gains. On any given day, you’ll likely see at least a few of these cheap stocks skyrocketing for one reason or another. Sometimes there are catalysts like stock market news. Other times there is no apparent reason for the move besides “YOLO,” according to the meme stock crowd.
This article looks at a handful of stocks under $5 that have seen insiders scooping up shares. Insider trading – the legal kind – involves management or large owners purchasing shares of the companies they work for or continue investing in. They are typically aware of different information types, including the inner workings.
These insider trades will be reported in things like Form 4s or Schedule 13s, showing the purchases made and the sizes of the purchases. Filings like the Form 4 will also show the average prices paid and how the shares were purchased (whether in the open market or via a private transaction).
Penny Stocks & Insider Buying
So, what’s the link between penny stocks and insider trading? There are a couple of reasons why keeping an eye on insider buying activity is a smart move when scouting for penny stocks.
Firstly, it’s like getting a sneak peek into the company’s health. If the insiders – the folks who know the company best – are buying stocks, it’s a pretty good hint that they believe the company is on a roll. That’s a thumbs up for investors who are on the hunt for promising penny stocks.
Secondly, insider buying can act like a flare in the night for those bullish investors out there. When insiders start buying, it’s often because they’re betting on the company’s stock price to climb. That can draw in other investors who are also hoping to ride the stock’s upward journey.
Lastly, insider buying can be a real confidence booster for other investors. When insiders buy up stocks, it can act as a signal that they feel good about the company. That can make other investors feel more comfortable about jumping in and buying shares.
Penny Stocks To Watch
- The Container Store Inc. (NYSE: TCS)
- Inozyme Pharma Inc. (NASDAQ: INZY)
- Rubicon Technologies (NYSE: RBT)
The Container Store Inc. (TCS)
Household name stocks have been lighting up scanners lately. Thanks to the epic rise in share prices of companies like Tupperware and Carvana, the “Phoenix From The Ashes Trade” is alive and well. The Container Store may be the latest name to join that list of penny stocks turning heads. For those unfamiliar, the company sells organizing solutions as well as custom spaces.
It recently posted worse-than-expected earnings results for the second quarter, which prompted a significant sell-off in the penny stock. Despite the performance, CEO Satish Malhotra explained, “Our first quarter topline performance was in line with our expectations and reflects the impact of the ongoing challenging macro environment. During the quarter, we continued our focus on bringing merchandise newness and innovation to our customers, and delivering an engaging in-store experience demonstrated by a net promoter score of 81. We also tested a number of different promotional events to entice our customers. While these tests pressured margins in the quarter, they unlocked key learnings that we are incorporating into our go-forward promotional plans.”
The news also resulted in certain analysts downgrading TCS stock. Lake Street cut its Buy rating to a Hold and dropped its $5 target to $3.50. But that wasn’t the same sentiment insiders shared. CEO Malhotra and Director Robert Jordan collectively nabbed roughly $100,000 worth of TCS stock at average prices ranging from $2.569 to $2.63. Malhotra accounted for most of the buying, with more than 29,000 shares purchased, totaling around $76,000.
Inozyme Pharma Inc. (INZY)
As of Thursday’s closing bell, Inozyme was still a penny stock. However, at the beginning of the day on Friday, shares popped above the $5 threshold. One of the latest catalysts helping the move came from insiders buying up shares of INZY stock. Institutional investor Pivotal bioVenture Partners Fund purchased nearly $4 million of the biotech stock at $4.80 as part of the recent $60 million financing round announced last month.
The raise came shortly after Inozyme gave an update regarding its global development strategy of its INZ-701 in patients with ENPP1 deficiency. Following recent discussions with the FDA, CEO Douglas Treco, Ph.D. explained, “We are pleased to have finalized our pediatric pivotal trial design with PPi, a well-established natural inhibitor of mineralization, as a primary endpoint in the U.S. and a co-primary endpoint in the EU. We have already observed that INZ-701 meaningfully increased PPi levels in our ongoing trial of INZ-701 in adults with ENPP1 Deficiency, and, based on our discussions with regulators in the U.S. and EU, we believe we have a clear path forward in our clinical development program for the treatment of ENPP1 Deficiency.”
With fresh capital in hand and active insiders following these developments, INZY stock could be one of the penny stocks to watch.
Rubicon Technologies (RBT)
The software-based products company services businesses and governments with its digital marketplace tailored for waste and recycling. Rubicon Technologies has been quiet in August in terms of stock market news.
However, that doesn’t mean there aren’t things to watch with this company. At the end of July, Rubicon announced the timing of its next earnings update, which will be next week on the 8th. The market will likely look to see if the company can maintain the trend from its first-quarter results.
Rubicon reported an earnings and sales beat for the first quarter. Sales came in at $181 million with a loss per share at 5 cents. These were better than the $165.19 million and loss of 30 cents per share expected by Wall Street. CEO Phil Rodoni also mentioned, “Rubicon remains the definitive digital platform for eliminating waste which enables us to provide a differentiated service offering to our customers. Our core business is strong, and we are focused on accelerating the Company’s progress to profitability while driving Rubicon’s next phase of growth.”
What do insiders think about RBT stock? Jose Miguel Enrich reported the June purchases involving various entities that Mr. Enrich manages. These purchases totaled more than $12.8 million.