In this article, we will take a detailed look at the 10 Micro-Cap Healthcare Stocks Insiders Are Buying. For a quick overview of such stocks, read our article 5 Micro-Cap Healthcare Stocks Insiders Are Buying.
Investors have always been interested in the connection between insider buying and stock returns. Over the past several years there’s been a huge influx of academic research and papers exploring insider trading and stock returns. For example, The Wharton’s Rodney L. White Center for Financial Research published a research paper back in 1999 entitled Estimating the Returns to Insider Trading. The paper used publicly available insider trading data from 1975 through 1996 and found that purchase portfolios post “abnormal returns” of more than 50 basis points per month. The research paper defined “purchase portfolio” as a stock portfolio that holds all shares bought by insiders for a six-month period. As opposed to purchase portfolios, the research found that sales portfolios do not show any significant abnormal returns. This is something verified by other studies and insider trading experts who repeatedly talk about why investors should not pay too much attention to insider selling and instead focus all their resources to insider buys.
Can Insider Purchase Portfolios Beat the Market?
An important point highlighted in the research said about one-quarter of the abnormal returns posted by purchase portfolios were recorded within the first five days after the initial transaction, and one-half accrued within the first month. The research paper also said that purchase portfolios outperform the market by a whopping 10.2% per year. About one third of these gains come from high beta stocks, small-cap stocks and “value” stocks, according to the research paper. We have previously discussed some relevant research on this theme showing how insiders enjoy more gains by buying small-cap stocks when compared to large-cap stocks. This could be because of the market’s propensity to overlook smaller companies and focus on large-cap companies. Insiders take advantage of this and keep piling into their company shares until they gain the broader market’s limelight.
A “Red Flag” in Mark Zuckerberg’s Selling of Meta Platforms Stock
Moving beyond academic research, how’s the insider trading space looks like in 2024? Is insider sentiment positive or negative this year? Ben Silverman, director of research at Verity Platform, while talking to CNBC in February, said that something related to Mark Zuckerberg’s selling of Meta Platforms shares concerned him. Silverman said that the stock jumped higher in February and there was an “acceleration” noted in insider selling from Zuckerberg who had been seeing Meta Platforms shares daily since November last year. Silverman said that this was a “red flag” that actually made him “cautious” since Zuckerberg was doing daily pattern sales but suddenly increased selling after Meta’s shares rose.
Silverman also said that insiders are really “good” buyers, citing insider buying during major crashes like the financial crisis of 2008, the 2016 banking crisis and the COVID-19 pandemic. When it comes to insider selling, the analyst thinks it boils down to event-specific dynamics where many transactions do not get much attention because the insider in question is just following a regular pattern (example: Jeff Bezos selling about 50 million Amazon shares earlier this year).
Industries and Sectors with Heavy Insider Buying in 2024
Silverman also said at the time that it would be important for investors to keep an eye out for insider sentiment buy/sell ratio as the first quarter nears its end. While insider selling activity has slowed down a bit when compared to earlier this year, it remains elevated. Insider Buy/Sell Ratio, according to data from GuruFocus, is 0.26, much lower than the median value of 0.34, and down 33% over the past one year.
Data from CNBC shows that insiders are piling into banks and healthcare stocks, an understandable trend as analysts have been expecting the AI-led market rally to broaden out to other sectors in 2024. Banks accounted for a whopping 63% of the total recent insider purchases, according to CNBC.
Photo by Austin Distel on Unsplash
Methodology
For this article we used Insider Monkey’s insider trading stock screener to find micro-cap healthcare stocks that recently saw heavy insider buying activity. From these stocks we chose 10 companies with the highest insider selling activity in terms of dollar value. Insider Monkey’s monthly newsletter and portfolio that 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 and outperformed the S&P 500 ETFs’ 144.9% gain by more than 54 percentage points. Some of the most popular healthcare stocks among hedge funds are Pfizer Inc (NYSE:PFE), Eli Lilly And Co (NYSE:LLY) and Novo Nordisk A/S (NYSE:NVO).
10. Silo Pharma Inc (NASDAQ:SILO)
Number of Hedge Fund Investors: N/A
Developmental stage biopharma company Silo Pharma Inc (NASDAQ:SILO) is working on treatments for PTSD, stress-induced psychiatric disorders, chronic pain conditions, and central nervous system (CNS) diseases. Silo Pharma Inc’s (NASDAQ:SILO) CEO Eric Weisblum on March 28 bought 4,508 shares of Silo Pharma Inc (NASDAQ:SILO) at $1.93 per share. The total value of this transaction was $8,713. Since March 28 through April 12 the stock has gained about 1%.
9. Flora Growth Corp (NASDAQ:FLGC)
Number of Hedge Fund Investors: 1
Florida-based cannabis products company Flora Growth Corp (NASDAQ:FLGC) is one of the micro-cap stocks insiders are buying. Flora Growth Corp’s (NASDAQ:FLGC) CEO Clifford Starke on April 8 snapped up a whopping 526,315 shares of Flora Growth Corp (NASDAQ:FLGC) at $1.90 per share. Since April 8 Flora Growth shares have lost about 12% in value.
Recently, IM Cannabis (NASDAQ:IMCC) said it entered into a strategic distribution agreement with Vessel, a subsidiary of Flora Growth Corp (NASDAQ:FLGC).
Last year, the company had talked about its cost-cutting measures and financial situation:
“Our cost cutting and resource optimization is expected to continue and form a key part of our strategy, but without sacrificing performance. Revenues for the second quarter of 2023 were $21.5 million, an increase of 140% compared to the second quarter of 2022. In the first half of 2023, revenues were $40.8 million, an increase of 210% year-over-year. Gross profit for the second quarter of 2023 was $4.0 million, an increase of 19% compared to the second quarter of 2022.
In the first half of 2023, gross profit was $9.3 million, an increase of 68% year-over-year. The growth in revenues and gross profit is driven by the inclusion of full period results for Phatebo and Just Brands, which were acquired in December 2022 and February 2022, respectively. On a consolidated basis, net loss for the quarter was $44.6 million, primarily due to the impact of impairment expenses of $34.9 million, loss from discontinued operations of $7.6 million and non-cash expenses of $1.2 million. Net loss for the first half of 2023 was $48.5 million, consisting substantially of impairment expenses of $34.9 million, loss from discontinued operations of $8.3 million and non-cash expenses of $2.7 million. As we look ahead, we will continue to prioritize Flora’s liquidity position.
Considering recent market shifts and economic conditions, we intend to take proactive steps to improve our liquidity by obtaining additional financing.”
Read the entire earnings call transcript here.
8. BioRestorative Therapies Inc (NASDAQ:BRTX)
Number of Hedge Fund Investors: 1
BioRestorative Therapies Inc (NASDAQ:BRTX) is working on treatments for chronic lumbar disc disease. BioRestorative Therapies Inc’s (NASDAQ:BRTX) VP of R&D Francisco Silva bought over 8,000 shares of BioRestorative Therapies Inc (NASDAQ:BRTX) at $1.23 per share on April 8. Since then the stock has gained about 4.7%.
Instead of smaller companies like BRTX, hedge funds are piling into major healthcare stocks like Pfizer Inc (NYSE:PFE), Eli Lilly And Co (NYSE:LLY) and Novo Nordisk A/S (NYSE:NVO).
7. Dominari Holdings Inc (NASDAQ:DOMH)
Number of Hedge Fund Investors: 2
Dominari Holdings Inc’s (NASDAQ:DOMH) President and 10% stake owner Kyle Wool on April 8 bought 4,250 shares of Dominari Holdings Inc (NASDAQ:DOMH) at $2.99 per share. Since then the stock has gained about 3.18%. Wool also amassed 9,500 shares of Dominari Holdings Inc (NASDAQ:DOMH) on April 4 at $2.84 per share.
Just two hedge funds tracked by Insider Monkey had stakes in Dominari Holdings Inc (NASDAQ:DOMH) as of the end of 2023.
Unlike Pfizer Inc (NYSE:PFE), Eli Lilly And Co (NYSE:LLY) and Novo Nordisk A/S (NYSE:NVO), which are highly popular among hedge funds, DOMH is a small company with just two hedge fund investors.
6. Palatin Technologies, Inc (NYSE:PTN)
Number of Hedge Fund Investors: 3
Palatin Technologies, Inc (NYSE:PTN) ranks sixth in our list of the micro-cap stocks with latest insider purchases. Palatin Technologies, Inc (NYSE:PTN) is working on treatments by harnessing melanocortin system. Palatin Technologies, Inc (NYSE:PTN) saw insider buying activity earlier this month when Robert Deveer Jr., one of its board directors, piled into 6,000 shares of Palatin Technologies, Inc (NYSE:PTN) at $2.12 per share. Since then the stock is down 4%.
Insider Monkey’s database of 933 hedge funds shows that just three hedge funds had stakes in Palatin Technologies, Inc (NYSE:PTN) as of the end of the fourth quarter of 2023.
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Disclosure. None. 10 Micro-Cap Healthcare Stocks Insiders Are Buying was initially published on Insider Monkey.