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Explore a selection of 13 penny stocks showcasing insider acquisitions during 2024. Gain exclusive insight into potential investment prospects driven by insider activity within the stock market.
This article delves into the 13 penny stocks experiencing insider purchases in 2024. For those seeking a concise overview, the top 5 stocks are highlighted in "5 Penny Stocks with Insider Buying in 2024." Insider transactions have long intrigued markets, with research indicating their potential to drive future stock increases. Studies, like one by Mervyn King and Aisla Roell at the London School of Economics, have extensively explored this phenomenon, analyzing insider purchases in the UK stock market from January 1986 through August 1987.
52 stocks from the dataset exhibited a remarkable 53% excess return compared to The Financial Times-Actuaries All Share Index one year after insider purchases. However, this return diminished significantly to approximately 3% when the evaluation period was reduced to just one month following the insider trade date. This suggests that insiders tend to be long-term investors, making investment decisions based on information and growth catalysts anticipated to unfold over the long haul.
Another notable research paper, "The Linkage between Insider Trading Activities, Market Efficiency, and Stock Information Content," references a pivotal study conducted by James H. Lorie and Victor Niederh in 1968. This study scrutinized the correlation between insider trading and stock returns, analyzing 200 major companies from 1962 to 1968. It concluded that insiders possess "special information," yet replicating insider trades yields profitability primarily over the long term. Specifically, trades with 8-month holding periods demonstrated substantial returns after factoring in transaction costs.
While insider trades can offer valuable insights, they don't always guarantee profitability. For instance, research by James H. Lorie and Victor Niederh randomly selected 30 companies and assessed their data and returns between 1961-1964 and 1957-1960. The findings didn't reveal a consistent trend of insiders trading with exceptional success. However, the researchers emphasized the importance of supplementing insider trades with thorough and timely analysis of data and research to enhance their utility.
A Vicious Cycle: Insiders Profiting From Market Reaction to Insider Trades?
Over the past few decades, a prevailing belief in the market suggests that when insiders buy a stock, its price tends to rise, while insider selling forecasts future declines. Consequently, insiders have seized this perception as an opportunity, strategically leveraging their trades to profit from ensuing market movements. This cyclic behavior, observed by researchers Dan Givoly and Dan Palmon in a study analyzing 68 AMEX-listed companies from 1973 to 1975, perpetuates a cycle where insiders manipulate stock prices for personal gain.
The paper The Linkage between Insider Trading Activities talked about this study:
The study concentrated on examining the correlation between insider transactions and subsequent news releases to identify transactions generating abnormal returns. However, it did not consistently demonstrate that insiders exploit forthcoming news to realize abnormal gains. Instead, it revealed that significant abnormal returns stem from the trades themselves, leading to the hypothesis that public investors mimic insiders' trading actions, acknowledging their superior knowledge. In essence, the authors proposed that insiders may profit after public investors emulate their transactions.
This article utilized Insider Monkey’s insider trading stock screener to pinpoint penny stocks witnessing insider buying in 2024. Paying heed to insider trading activity is crucial due to its proven track record. Insider Monkey’s monthly newsletter and portfolio, emphasizing activist hedge funds, insider trading insights, and stock picks from hedge fund investor sources, boasted an impressive 199.2% return from March 2017 to March 12, 2024, surpassing the S&P 500 ETFs’ gain by over 54 percentage points.
Number of Hedge Fund Investors: N/A
Ranked 13th among penny stocks with insider buying in 2024 is Marpai Inc (NASDAQ:MRAI), a health plans services provider. On March 7, 2024, CEO Damien Lamendola purchased 910,000 shares at $1.65 each. Since this transaction, the stock has surged approximately 60% in value.
Number of Hedge Fund Investors: 1
Flora Growth Corp (NASDAQ:FLGC), a cannabis products company, is among the penny stocks witnessing insider buying in 2024. On April 8, 2024, CEO Clifford Starke purchased 526,315 shares at $1.90 each. However, since the transaction, the stock has depreciated by approximately 33% in value.
Number of Hedge Fund Investors: 3
Intrusion Inc. (NASDAQ:INTZ), a Texas-based cybersecurity company, is among the noteworthy penny stocks witnessing recent insider purchases. On April 22, 2024, CEO Anthony Scott acquired 585,748 shares of Intrusion Inc. (NASDAQ:INTZ) at $1.70 per share. However, from April 22 through May 8, the stock has experienced a decline of approximately 3.7%.
Number of Hedge Fund Investors: 5
Modular Medical Inc (NASDAQ:MODD), a development stage medical device company, is among the penny stocks featuring insider buying activity in 2024. On February 16, 2024, Manchester Management Co LLC, holding a director status at Modular Medical Inc (NASDAQ:MODD), acquired 900,000 shares at $1.10 per share. Subsequently, the stock price has experienced a decline of approximately 2.3% since this transaction.
Number of Hedge Fund Investors: 8
Ranked ninth among penny stocks with insider buying in 2024 is Corvus Pharmaceuticals Inc (NASDAQ:CRVS), a clinical stage biopharmaceutical company. On May 6, 2024, CEO Richard A. Miller, MD, purchased 577,634 shares at $1.73 each. Since this transaction, as of May 8, the stock has increased by about 2%.
Earlier this month, the company extensively discussed its pipeline and future plans.
Number of Hedge Fund Investors: 10
Zura Bio Ltd (NASDAQ:ZURA) stands out as one of the noteworthy penny stocks witnessing significant insider buying this year. On April 22, 2024, Someit Sidhu, a director at Zura Bio Ltd (NASDAQ:ZURA), acquired 1,186,901 shares at $3.13 each, totaling approximately $3.7 million. Since this transaction, the stock has surged by an impressive 42%.
Number of Hedge Fund Investors: 14
Absci Corp (NASDAQ:ABSI), a biotech company, is among the penny stocks featuring insider buying activity in 2024. On March 1, 2024, Redmile Group, LLC, holding a director position at Absci Corp (NASDAQ:ABSI), acquired 222,222 shares at $4.50 each. However, since this transaction, the stock has experienced a decline of 9%.
Number of Hedge Fund Investors: 14
Tenaya Therapeutics Inc (NASDAQ:TNYA), based in California, is among the penny stocks featuring insider buying in 2024. On February 12, 2024, David V. Goeddel, a director at Tenaya Therapeutics Inc (NASDAQ:TNYA), acquired a significant 2,222,222 shares at $4.50 each. However, since this transaction, the stock has declined by 20%.
Click here to continue reading and explore 5 Penny Stocks with Insider Buying in 2024.
Source: insidermonkey
