Penny Stocks with Insider Buying Surge in 2024 Despite High Risks

Penny stocks under $5 per share saw a surge in insider buying activity in 2024, despite their high-risk reputation. Insider Monkey's top 13 penny stocks with insider buying include Marpai Inc., Flora Growth Corp., and Intrusion Inc., among others.

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Nitish Verma
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Penny Stocks with Insider Buying Surge in 2024 Despite High Risks

Penny Stocks with Insider Buying Surge in 2024 Despite High Risks

Penny stocks, trading under $5 per share, have seen a surge in insider buying activity in 2024 despite their reputation as high-risk investments prone to price manipulation. Thorough research and analysis of company fundamentals, industry life-cycle, and sound management can lead to significant returns, as seen in past examples like Monster Beverage Corporation and Inovio Inc.

Why this matters: The surge in insider buying activity in penny stocks has significant implications for individual investors and the overall market, as it can indicate potential growth opportunities and influence market trends. Furthermore, understanding the dynamics of insider trading can help investors make more informed decisions and mitigate risks in their investment portfolios.

Academic research has consistently shown that when insiders are buying into a stock, the odds of it going higher in the future are significantly increased. A study by Mervyn King and Aisla Roell at the London School of Economics found that 52 stocks, likely, focus in the dataset posted a 53% return in excess of The Financial Times Actuaries All Share Index when evaluated one year after insider purchases.

Insiders operate with special information and tend to be long-term investors, piling into their company shares based on growth catalysts expected to show their impact in the long term. A study by James H. Lorie and Victor Niederh found that trades with 8-month holding periods had large returns after transaction costs were taken into account.

However, insiders often play the market by profiting from stock movements in response to insider trading activity, creating a vicious circle. Researchers Dan Givoly and Dan Palmon found that insiders gain might take place after public investors conduct transactions triggered by insiders.

Using Insider Monkey's insider trading stock screener, the top 13 penny stocks that saw insider buying activity in 2024 include Marpai Inc. (NASDAQ: MRAI), where CEO Damien Lamendola bought 910,000 shares at $1.65 each, with the stock gaining about 60% in value since the transaction. Flora Growth Corp. (NASDAQ: FLGC) saw CEO Clifford Starke buy 526,315 shares at $1.90 per share, though the stock lost about 33% in value since the transaction.

Other notable penny stocks with insider buying include Intrusion Inc. (NASDAQ: INTZ), where CEO Anthony Scott bought 585,748 shares at $1.70 per share, and Modular Medical Inc. (NASDAQ: MODD), which saw Manchester Management Co. LLC, with a director status, buy 900,000 shares at $1.10 per share. Corvus Pharmaceuticals Inc. (NASDAQ: CRVS) CEO Richard A. Miller, MD, also bought 577,634 shares at $1.73 each.

Insider Monkey's monthly newsletter and portfolio, which focuses on activist hedge funds, insider trading, and stock picks from hedge fund investor newsletters and conferences, returned 199.2% between March 2017 and March 12, 2024, outperforming the S&P 500 ETFs' 144.9% gain by more than 54 percentage points. This demonstrates the potential value of paying attention to insider trading activity when making investment decisions, especially in the volatile world of penny stocks.

Key Takeaways

  • Penny stocks see surge in insider buying activity in 2024 despite high-risk reputation.
  • Insider buying can indicate potential growth opportunities and influence market trends.
  • Academic research shows insider buying increases odds of stock price going higher.
  • Top penny stocks with insider buying in 2024 include Marpai, Flora Growth, and Intrusion.
  • Paying attention to insider trading can lead to significant returns, outperforming market indices.