Investing 101: Stocks Under $5 With Insider Buying

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(List compiled by Becca Lipman and Daniel Guttridge. Insider data sourced from Fidelity, all other data sourced from Finviz.)

Penny stocks have a solid reputation for being a risky investment. However, if the potential rewards excite you, then the list below may provide an interesting starting point for your search.

To create the following list we took a universe of penny stocks (priced under $5) and searched for names with a market cap over $300M experiencing significant levels of insider buying over the past six months.

Want clarification for terms used above, as well as their implications? Let's review:

Market Capitalization (Market Cap): Market capitalization, commonly referred to as market cap, is the total market value of a company's outstanding shares. It can be thought of as a measure of company's size. It can be calculated by multiplying the number of shares by the current price of the shares. Companies with higher market cap are considered to have more trustworthy information because they have greater histories of profitability and data.
 

Insider Trading: Many analysts follow insider buying trends because, after all, insiders know more about their companies than anyone else. Their investment activity is closely monitored and can tell us a lot about where they feel the business is heading.

Insider buying is represented as a percentage of the share float. Companies experiencing insider buying over the past six months provide an indicator that insiders think the stock is undervalued at current levels. Inversely, insider selling serves as a negative indicator.

Now that you're armed with information, take a look at the following list of penny stocks. Insiders seem to think these names are good value -- do you? Use this list as a starting-off point for your own analysis.

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Data sorted by insider buying as a % of share float.

1. Opko Health, Inc. (OPK): Medical Appliances & Equipment Industry. Market cap of $1.16B. Price at the time of writing (12:30 PM EST) at $4.10. Net insider shares purchased over the current quarter at 6.85M, which is 5.03% of the company's 136.31M share float. The stock is a short squeeze candidate, with a short float at 9.47% (equivalent to 10.83 days of average volume). The stock has had a couple of great days, gaining 10.74% over the last week.

2. MannKind Corp. (MNKD): Biotechnology Industry. Market cap of $335.28M. Price at the time of writing (12:30 PM EST) at $2.65. Net insider shares purchased over the current quarter at 3.48M, which is 4.39% of the company's 79.29M share float. The stock is a short squeeze candidate, with a short float at 28.55% (equivalent to 25.89 days of average volume). The stock has had a couple of great days, gaining 6.67% over the last week

3. Vantage Drilling Company (VTG): Oil & Gas Drilling & Exploration Industry. Market cap of $363.33M. Price at the time of writing (12:30 PM EST) at $1.28. Net insider shares purchased over the current quarter at 5.35M, which is 3.22% of the company's 166.05M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.08). The stock has performed poorly over the last month, losing 23.78%.

4. TransAtlantic Petroleum Ltd. (TAT): Oil & Gas Drilling & Exploration Industry. Market cap of $387.33M. Price at the time of writing (12:30 PM EST) at $1.03. Net insider shares purchased over the current quarter at 1.67M, which is 0.81% of the company's 205.75M share float. The stock has performed poorly over the last month, losing 27.4%.

5. Mueller Water Products, Inc. (MWA): Industrial Equipment & Components Industry. Market cap of $342.30M. Price at the time of writing (12:30 PM EST) at $2.42. Net insider shares purchased over the current quarter at 125.0K, which is 0.09% of the company's 132.60M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.48). The stock is a short squeeze candidate, with a short float at 7.27% (equivalent to 6.24 days of average volume). The stock has had a couple of great days, gaining 7.84% over the last week.

6. Charming Shoppes Inc. (CHRS): Apparel Stores Industry. Market cap of $345.26M. Price at the time of writing (12:30 PM EST) at $3.05. Net insider shares purchased over the current quarter at 35.0K, which is 0.03% of the company's 101.38M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 3.45). The stock is a short squeeze candidate, with a short float at 9.86% (equivalent to 7.64 days of average volume). The stock has had a couple of great days, gaining 12.08% over the last week.

7. Fortress Investment Group LLC (FIG): Asset Management Industry. Market cap of $1.64B. Price at the time of writing (12:30 PM EST) at $3.67. Net insider shares purchased over the current quarter at 60.0K, which is 0.03% of the company's 177.49M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.48). The stock has performed poorly over the last month, losing 23.86%.

8. Hercules Offshore, Inc. (HERO): Oil & Gas Drilling & Exploration Industry. Market cap of $517.05M. Price at the time of writing (12:30 PM EST) at $3.88. Net insider shares purchased over the current quarter at 32.0K, which is 0.03% of the company's 112.97M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 3.04). The stock has had a couple of great days, gaining 13.29% over the last week.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks


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