Investing in penny stocks represents an enticing prospect for those seeking to leverage the stock market’s potential gains. Characterized by an inherent risk and the promise of significant rewards, these under-$5 shares often become the subjects of speculation.
Many are drawn to the pursuit of extraordinary profits, a journey that sometimes leads to sudden surges in specific penny stocks. These upswings might be triggered by particular market news or, at times, appear to happen without clear justification—a phenomenon frequently ascribed to the “YOLO” mindset among meme stock aficionados.
Exploring Sub-$5 Stocks with Noticeable Insider Activity
In the following analysis, we delve into several stocks, each priced under $5, that have been marked by insider activity. Legitimate insider trading—unlike its unlawful counterpart—encompasses scenarios where significant stakeholders, such as company executives, choose to invest in their own firms or maintain their existing investment tactics.
These insiders often possess exclusive insights into the company’s internal operations, granting them a perspective not readily available to the average investor.
Insights Gained from Inside Transactions
Inside transactions, typically recorded in specialized documents like Form 4s or Schedule 13s, disclose particulars of the acquisitions. These can include the number of shares purchased, the mean cost, and the manner of acquisition, whether via the open market or private transactions.
Unraveling the Link Between Penny Stocks and Insider Buying
But what connects penny stocks with insider purchasing? Several reasons make tracking insider activity a prudent method when compiling a penny stocks to watch list.
A Glimpse into the Organization’s Health?
Monitoring insider buying may compare to getting a behind-the-scenes view of the company’s overall health. If those most familiar with the company are investing in its stocks, it’s often a positive sign that the organization is on a prosperous path. Such intelligence can be invaluable for those investors hunting for lucrative penny stocks with growth potential.
Navigating the Volatile World of Penny Stocks
In essence, the domain of penny stocks is a landscape riddled with both unpredictability and opportunity. Through meticulous observation of insider buying trends and grasping their implications, investors may unearth distinct prospects and secure an advantage in this exhilarating facet of the stock market.
The following compilation showcases penny stocks with notable insider movements in August. Do these stocks present worthwhile risks as potential purchases? Are they best left untouched? The decision rests with you, but with the insights provided herein, you’re better equipped to make informed decisions. This also continues the list of penny stocks in our article 4 Penny Stocks To Buy According To Insiders In August.
Penny Stocks To Buy [According To Insiders]
- Rackspace Technology Inc. (NASDAQ: RXT)
- 1847 Holdings (NASDAQ: EFSH)
- RealReal Inc (NASDAQ: REAL)
- TFF Pharmaceuticals (NASDAQ: TFFP)
- Bioventus Inc. (NASDAQ: BVS)
- Gannett Co (NYSE: GCI)
- CommScope Holdings (NASDAQ: COMM)
Rackspace Technology Inc. (RXT)
Cloud computing and edge technology stocks have come into focus this year thanks to the spike of attention on Artificial Intelligence. The AI stock rally was prompted (no pun intended) by growing excitement from things like ChatGPT, Bard, and other LLMs. Rackspace specializes in multi-cloud solutions to help design, build, and operate customer cloud environments.
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This month the company announced the launch of a hosted private cloud generative AI solution architecture. Dell Technologies and NVIDIA AI will power this. “Generative AI is a game changer, demonstrating how technology can transform how industries operate,” said Jeff Boudreau, president of Infrastructure Solutions Group, Dell Technologies. Rackspace also announced earnings for the second quarter.
It beat EPS and sales expectations by a slight margin. Management also painted a picture of company strength with its revenue guidance. Rackspace is expecting up to $732 million for the year. The news comes amid a slew of analyst movements. Credit Suisse adjusted its stance on Rackspace. The firm has an Outperform rating. However, it boosted its $4.15 target and now has an RXT stock forecast price of $5. BMO raised its $1.50 target to $2.50 and maintains an Outperform rating.
1847 Holdings (EFSH)
Penny stocks aren’t always the high-flying equities that some expect. In fact, many companies have fallen on hard times, and the stock price reflects the struggle. 1847 Holdings is in that camp and shares recently hit fresh 52-week lows this week. The drop in the business acquisition company’s share price dropped after reporting lackluster earnings results for the second quarter. In particular, 1847 posted a loss per share of 76 cents. This was significantly lower than last year’s 28-cent loss per share.
As for the prospects, Ellery W. Roberts, CEO of 1847 Holdings, commented, “Due to ShareIntel’s investigation, we have become aware of trading imbalances. We will delve deeper into the discrepancies identified in the analysis and contact necessary parties such as brokers, Broadridge, and the SEC to gather more information and ensure adherence to regulatory standards. We remain diligent and committed to taking all necessary actions to protect the interests of our shareholders, and will continue to work with ShareIntel and other partners to combat illegal short selling.”
Short-sellers or not, it hasn’t distracted EFSH stock insiders from buying shares. 10% Owner Strategic Risk LLC bought over 100,000 shares at average prices between $0.1596 and $0.17 this month.
The RealReal Inc. (REAL)
Have you heard of consignment stores? Reselling used goods is typically associated with unwanted items that go on to a new home after someone purchases them at a discount from a consignment shop. But what if you could buy things like Louis Vuitton, Coach, Chanel, Gucci, and other high fashion brands on consignment? This is what The RealReal is. The company is an online (and in some places, physical) marketplace for authenticated luxury goods.
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Shares have been moving higher for the last few months and it began when the company reported its first-quarter results. It beat estimates for earnings per share but missed sales expectations by a slight margin. “Our strategic shift to re-focus on the higher margin portion of the consignment business is showing results. In the second quarter of 2023, GMV and revenue exceeded the mid-point of our guidance, and Adjusted EBITDA exceeded the high-end of our guidance range for the quarter,” said John Koryl, Chief Executive Officer of The RealReal.
In reviewing second-quarter results, The RealReal beat EPS estimates once again and missed sales expectations by a wider margin. Revenue Guidance came in between $540 million to $560 million, with the higher end of the range above expectations of $555.26 million. Now, notable funds (not insiders) may be starting to find opportunities.
Scion Asset Management, run by notable “Big Short” investor Michael Burry, appears bullish. In the latest round of 13F’s from institutional investors like Scion, Burry reported a stake of 1.5 million shares.
