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Investing 101: Ten Micro Cap Stocks with Institutional and Insider Buying

Posted
9/9/2011 9:47:00 PM
By: Kapitall
Referenced Stocks:MILL;MNI;NEOP;PIP;PRMW;RAS;SBCF;TPLM;VGZ;VLNC

(Article by Becca Lipman. List compiled by Eben Esterhuizen, CFA. Insider buying data sourced from Yahoo! Finance. Institutional data sourced from Fidelity. All other data sourced from Finviz.)

For this list we started with a universe of 180 stocks with market caps between $100M and $300M. We searched among them for the names experiencing significant levels of insider buying over the past six month.

From that universe we further identified the ones with significant levels of institutional buying in the current quarter.

We list our top ten results below.

If you are unfamiliar with the implications of the list's criteria have no fear, we all start at the beginning. We will first explore the terms in detail:

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.

Example, If company X has 15 million outstanding shares valued at $25 a share, the market cap would be $15M x $25 = $375M.  If Company's X's stock price rises to $30 then the new market value will be $450 Million ($15M x $30 = $450M).

Small cap: $300M - $2B
Micro cap: $50M - $300M

Company's size can matter when examining risk. Stocks with a large market cap are generally less volatile to market conditions and are considered to have more trustworthy information because they have greater histories of profitability and data. 

Institutional investors are also known as "big money" investors or managers. They represent big pools of money such as investment banks, pension funds, mutual funds, hedge funds, endowment funds, etc. When they invest in stocks, they can invest hundreds of thousands of dollars or more at one time. These transactions, called "block trades," can have a significant effect on share prices.

Because institutional investors handle such large amounts of money, it is easy enough to assume that the big money managers know what they are doing -- or at the very least know more than the average investor. This is why these investors are also sometimes referred to as "smart money.”

If institutional investors start investing in a company, regular investors can assume that some of the most talented analysts and money managers expect the company's share prices to increase over time. The stocks on our list are experiencing significant investment from big money."

Insider Buying: 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, use the list below as a starting-off point for your own research. Do you think insiders and hedge funds have the right idea?

Analyze These Ideas (Tools Will Open In A New Window)

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List sorted by market cap.

1. Vista Gold Corp. (VGZ): Engages in the evaluation, acquisition, exploration, and advancement of gold exploration and development projects in Australia, North America, and Indonesia. Market cap of $285.43M. Net institutional purchases in the current quarter at 13.5M shares, which represents about 21.62% of the company's float of 62.44M shares. Over the last six months, insiders were net buyers of 29,500 shares, which represents about 0.05% of the company's 62.44M share float.

2. Neoprobe Corp. (NEOP): Engages in the development and commercialization of surgical and diagnostic oncology products that enhance patient treatment by meeting the critical decision making needs of physicians in the United States and internationally. Market cap of $270.84M. Net institutional purchases in the current quarter at 17.5M shares, which represents about 19.93% of the company's float of 87.79M shares. Over the last six months, insiders were net buyers of 100,320 shares, which represents about 0.11% of the company's 87.79M share float.

3. Triangle Petroleum Corporation (TPLM): Engages in the acquisition, exploration, and development of unconventional shale oil resources in the Bakken Shale and Three Forks formations in the Williston Basin of North Dakota and Montana. Market cap of $206.11M. Net institutional purchases in the current quarter at 2.9M shares, which represents about 7.5% of the company's float of 38.69M shares. Over the last six months, insiders were net buyers of 880,000 shares, which represents about 2.27% of the company's 38.69M share float.

4. Valence Technology Inc. (VLNC): Develops, manufactures, sells, and supplies high-energy power systems in the United States and internationally. Market cap of $181.02M. Net institutional purchases in the current quarter at 17.1M shares, which represents about 19.97% of the company's float of 85.61M shares. Over the last six months, insiders were net buyers of 3,589,740 shares, which represents about 4.19% of the company's 85.61M share float.

5. Primo Water Corporation (PRMW): Provides multi-gallon purified bottled water, self-serve filtered drinking water, and water dispensers in the United States and Canada. Market cap of $150.8M. Net institutional purchases in the current quarter at 8.5M shares, which represents about 44.% of the company's float of 19.32M shares. Over the last six months, insiders were net buyers of 190,000 shares, which represents about 0.98% of the company's 19.32M share float.

6. Seacoast Banking Corp. of Florida (SBCF): Operates as the holding company for Seacoast National Bank that provides various financial products and services in the United States. Market cap of $133.76M. Net institutional purchases in the current quarter at 2.9M shares, which represents about 3.96% of the company's float of 73.28M shares. Over the last six months, insiders were net buyers of 183,322 shares, which represents about 0.25% of the company's 73.28M share float.

7. RAIT Financial Trust (RAS): Operates as a self-managed and self-advised real estate investment trust (REIT). Market cap of $131.81M. Net institutional purchases in the current quarter at 29.5M shares, which represents about 78.94% of the company's float of 37.37M shares. Over the last six months, insiders were net buyers of 101,693 shares, which represents about 0.27% of the company's 37.37M share float.

8. Miller Petroleum, Inc. (MILL): Engages in the exploration, production, and drilling of oil and natural gas resources in the United States. Market cap of $128.58M. Net institutional purchases in the current quarter at 2.7M shares, which represents about 9.62% of the company's float of 28.07M shares. Over the last six months, insiders were net buyers of 10,000 shares, which represents about 0.04% of the company's 28.07M share float.

9. The McClatchy Company (MNI): Operates as a newspaper publisher in the United States. Market cap of $124.39M. Net institutional purchases in the current quarter at 9.9M shares, which represents about 20.42% of the company's float of 48.48M shares. Over the last six months, insiders were net buyers of 318,799 shares, which represents about 0.66% of the company's 48.48M share float.

10. PharmAthene, Inc. (PIP): Engages in the development and commercialization of medical countermeasures against biological and chemical weapons in the United States. Market cap of $111.89M. Net institutional purchases in the current quarter at 2.4M shares, which represents about 7.94% of the company's float of 30.21M shares. Over the last six months, insiders were net buyers of 430,000 shares, which represents about 1.42% of the company's 30.21M share float.