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Corporate Insiders Are Selling These 10 Small-Cap Stocks

In this article, we will take a detailed look at Corporate Insiders Are Selling These 10 Small-Cap Stocks. For a quick overview of such stocks, read our article Corporate Insiders Are Selling These 5 Small-Cap Stocks.

When the inflation crisis started and the Federal Reserve began raising interest rates, investors were quick to exit small-cap stocks which are deemed risky in a belt-tightening environment. Small-cap stocks started to rebound in the last quarter of 2023, when the AI-led rally pushed the broader stock market high, crushing all recession-related worries. The Russell 2000 Index jumped 14% in the fourth quarter, surpassing the large cap-focused Russell 1000 and mega-cap Russell Top 50 Indexes in the period.

Tom Lee, the Managing Partner at Fundstrat Global Advisors, is one of the market experts who are bullish on small-cap stocks for 2024. Recently, while talking to CNBC, Lee said that he expects the Russell 2000 to jump by a whopping 50% in 2024 and cross 3,000 for the first time. Like many others, Lee’s thesis is that when the Federal Reserve begins to cut rates, investors will flock to smaller, growth-focused companies for long-term gains. Investment management company Lord Abbett also shared similar optimism around small-cap stocks in a report published in January:

“As 2024 begins, there’s growing optimism for a resurgence in global small cap stocks. In 2023, these stocks underperformed compared to their large cap counterparts, creating a significant valuation gap. The convergence of favorable factors, including potential changes in global central bank policies, suggests a bright future for small caps in 2024. Interest-rate cuts in response to easing inflation could lower borrowing costs for small cap companies, encouraging growth. Additionally, the potential for increased merger and acquisition activity is high, as lower funding costs could drive larger companies to acquire high-growth small cap firms.”

But given the current rally of mega-cap tech stocks on the back of the AI boom, many also question this bullish thesis about the broader small-cap space. After all, over the past several years small caps have failed to attract investor attention. Since the beginning of 2020, the Russell 2000 index jumped 24%, compared to the S&P 500’s over 60% gain. A recent report by Financial Times quoted Greg Tuorto, a small-cap portfolio manager at Goldman Sachs Asset Management, who said that he has not seen “big money” moving into small-cap stocks since 2016-2017. The analyst believes a “little greed”, M&A activity and a rebound in IPOs could infuse life in small-cap stocks.

Part of the reason why small-cap indices have been posting lackluster results is the fact that many small-cap companies end up losing a lot of money or go bankrupt. These losers drag the overall returns of small-cap indices. But the real allure of small-cap stocks is their capability to reward investors, who are willing to take the risk and put in the effort, with huge returns.  Tuorto reportedly said that if (and that’s a big if) you pick the “right” small-cap stocks, you are not “right by 20 percent more than the Street, your earnings and revenue estimates could be double where the consensus is .”

While some investors are positioning themselves to gain from the possible rally in small-cap stocks, there are some corporate insiders dumping small-cap names. In this article we will take a look at some of the small-cap stocks that recently saw insider selling activity. To find these stocks we used Insider Monkey’s insider trading stock screener and selected small-cap stocks that saw insider selling over the past few weeks.

Photo by jason briscoe on Unsplash

10. Mission Produce Inc (NASDAQ:AVO)

Number of Hedge Fund Investors: 2

California-based avocado company Mission Produce Inc (NASDAQ:AVO) is one of the small-cap stocks with recent insider selling. Luis A. Gonzalez, a board director at Mission Produce Inc (NASDAQ:AVO), dumped 42,008 shares of Mission Produce Inc (NASDAQ:AVO) on March 18. On March 19 he sold 7,183 company shares. On March 12 the director had sold 231,250 shares of Mission Produce Inc (NASDAQ:AVO) at $11.83 per share. Since March 12 the stock is down about 2.9%.

Earlier this month Mission Produce Inc (NASDAQ:AVO) posted first quarter results, according to which adjusted EPS in the period came in at $0.09, beating estimates by $0.16. Revenue in the quarter jumped 21.2% year over year to $258.7 million, surpassing estimates by $47.95 million.

The company talked about business updates and expectations in its earnings call:

“We believe the business is well positioned to generate positive free cash flow in fiscal 2024 and beyond. I want to reiterate that our core capital allocation priority is maintaining a healthy capital structure that minimizes leverage. Debt paydown remains our near-term priority and given our forecast for improved operating cash flow for the full year of fiscal 2024, we expect to be in position to strengthen our balance sheet by the end of this fiscal year. In terms of our near-term outlook on the fundamental drivers of our operations, we are providing some context around our expectations for industry conditions to help inform your modeling assumptions. Beginning with avocados, industry volumes are expected to be relatively flat in the fiscal 2024 second quarter versus the prior year period.

Sourcing from Mexico should taper off in the latter part of the quarter as we near completion of the current harvest season, while California harvest volume should begin to build toward the middle of the quarter as weather permits. Peruvian volumes are unlikely to have a meaningful impact on the market during the quarter. Avocado pricing is expected to be slightly higher on a sequential basis and approximately 10% to 15% higher than the $1.30 per pound average experienced in second quarter of fiscal 2023, assuming that volume aligns with our expectations. Turning to blueberries, harvest timing shifts relative to last year have extended our Peruvian blueberry season. As a result, we expect that approximately 20% of the harvest will be sold through in the fiscal second quarter, whereas the season was substantially complete in the prior year period.”

Read the entire earnings call transcript here.

9. Agiliti Inc (NYSE:AGTI)

Number of Hedge Fund Investors: 6

Minnesota-based medical equipment company Agiliti Inc (NYSE:AGTI) ranks ninth in our list of the small-cap stocks insiders are selling. Lee Neumann, the General Counsel and VP at Agiliti Inc (NYSE:AGTI), on March 20 sold 4,685 shares of Agiliti Inc (NYSE:AGTI) at $10.07 per share. Agiliti Inc’s (NYSE:AGTI) CEO Tom Leonard had sold 27,558 shares of Agiliti Inc (NYSE:AGTI) on February 14 at $7.23 per share. Since then the stock is up 40%.

Alger Weatherbie Specialized Growth Fund made the following comment about Agiliti, Inc. (NYSE:AGTI) in its Q3 2023 investor letter:

Agiliti, Inc. (NYSE:AGTI) provides end-to-end healthcare technology management and service solutions to the U.S. healthcare industry. The company also offers comprehensive medical equipment management and service solutions to reduce capital and operating expenses, increase medical equipment and staff productivity, and improve patient safety. During the quarter, shares detracted from performance after the company reported mixed fiscal second quarter results, where revenues beat consensus estimates but missed on earnings. Further, management lowered their full year 2023 earnings guidance, where they cited two potential headwinds: 1) continued contraction in their peak needs rentals business due to excess equipment inventory at hospitals purchased during the pandemic, and 2) higher-than-expected initial costs for on- boarding larger contract wins.”

8. Biolife Solutions Inc (NASDAQ:BLFS)

Number of Hedge Fund Investors: 10

Bioproduction tools and solutions company Biolife Solutions Inc (NASDAQ:BLFS) ranks eighth in our list of the small-cap stocks insiders are selling.  Amy DuRoss, a director at Biolife Solutions Inc’s (NASDAQ:BLFS) board, sold 5,065 shares of Biolife Solutions Inc (NASDAQ:BLFS) on March 13 at $17.00 per share. Since then the stock has gained by 2.78%.

Conestoga Micro Cap Composite made the following comment about BioLife Solutions, Inc. (NASDAQ:BLFS) in its Q3 2023 investor letter:

“BioLife Solutions, Inc. (NASDAQ:BLFS): BLFS engages in the development, manufacture, and marketing of bio preservation tools for cells and tissues. The company reported financial results below estimates for 2Q23, including revenues down 3% year-over-year. A 26% decline for freezers and thaw systems had the largest negative impact on results. Management also lowered financial guidance for 2023 and confirmed their intent to divest the freezers business, about 1/3 of total revenues, by year-end. The bioprocessing industry continues to be negatively impacted by inventory destocking and elongated sales cycles.”

7. SoundHound AI Inc (NASDAQ:SOUN)

Number of Hedge Fund Investors: 13

AI-based voice technology company SoundHound AI Inc (NASDAQ:SOUN) has gained a lot of attention this year on the back of the AI boom, after SoundHound AI Inc (NASDAQ:SOUN) revealed its partnership with Nvidia. However, the stock is currently being dumped many corporate insiders. Marcus Lawrence, a director at SoundHound AI Inc’s (NASDAQ:SOUN) board, sold 100,000 shares of SoundHound AI Inc (NASDAQ:SOUN) on March 12 at $7.13 per share. SoundHound AI Inc (NASDAQ:SOUN) CEO Keyvan Mohajer also sold 48,837 company shares at $8.37 on March 19. SoundHound AI Inc’s (NASDAQ:SOUN) CFO, COO and Chief Product Officer were also seen selling SoundHound AI Inc (NASDAQ:SOUN) shares this month. Since March 19, SoundHound AI Inc (NASDAQ:SOUN) shares have lost about 30% in value.

6. Supernus Pharmaceuticals Inc (NASDAQ:SUPN)

Number of Hedge Fund Investors: 16

Maryland-based biopharma company Supernus Pharmaceuticals Inc (NASDAQ:SUPN) saw insider selling activity earlier this month when its VP of Intelletual Property and Chief Scientific Officer Padmanabh P. Bhatt on March 21 sold 14,491 shares of Supernus Pharmaceuticals Inc (NASDAQ:SUPN) at $35.31 per share. Since then the stock is down 7.66%.

Click to continue reading and see Corporate Insiders Are Selling These 5 Small-Cap Stocks.

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Disclosure. None. Corporate Insiders Are Selling These 10 Small-Cap Stocks is originally published on Insider Monkey.

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Click to continue reading…