Institutions & Insiders Are Buying These Penny Stocks Right Now
If there’s one thing that gets traders excited about penny stocks, it’s when “big buyers” are present. But how would you know a major institution was buying shares of a company? Furthermore, how could you find out if insiders are joining the party too? Is it a big secret that only Wall Street’s elite know about? To the untrained eye, you might think that would be the case. But all you really need to do is know where to look, and public information is readily available.
If you read our article, “Penny Stocks & Due Diligence: Understanding Important SEC Filings,” you’ve got a good idea of what to look for. We’re going to focus on things like Form 4s for insiders and 10% owners. As far as institutional interest goes, you’ll often find the information in things like 13Ds and 13Gs. As we explained:
These Schedules involve parties reporting ownership of stock that is over 5% of a certain equity class in a company. That 5% threshold is considered “significant ownership” of a company. Because of this, it must be declared. There are much longer format definitions of these forms. But the main difference involves the size of the investor. A Schedule 13D is filed by an “active investor” and those owning more than 20% of the outstanding shares.
A 13G pertains to “passive investors” owning less than 20% of a company’s outstanding shares. Once a “passive investor” reaches more than 20% of the OS, they need to start filing 13D statements. These are important because we’ll see which large funds or investors are taking a larger position in a company. These typically lift sentiment for a given company.
Is Insider Or Institutional Ownership Important?
When it comes to the importance or lack thereof, it really comes down to the firm or individual purchasing or reporting a position. A 0.2% stake might be menial, a 5% stake from a major fund could be big and a reflection of confidence in the market behind a particular company.
On the other hand, when it comes to company directors or management buying shares, usually the size of the position matters, but not as much as the fact that insiders are buying. Again, it’s relatively situational in nature, but the act of bigger buyers taking a position usually raises eyebrows at the very least. Here are 4 companies with recent filings showing such positions:
22nd Century Group Inc.
Shares of 22nd Century have been in rally-mode since mid-November. How much of a rally? Well, during the period from November 13th through this week, XXII stock has climbed as much as 505%. It also reached fresh 52-week highs of $4.66, a price it hasn’t traded at since 2014. While the company’s focus had been on its low nicotine tobacco product, a more current point of interest is on the pot play that the company has begun establishing.
Earlier this month, 22nd Century and KeyGene launched an…