Interested in analyzing the trades of company insiders and sophisticated big money managers? If so, the following list might be an interesting starting point for your own analysis.
To create this list, we started with a universe of about 100 stocks trading under $2. To control for quality, we only focused on companies with market caps north of $300M.
To further refine the list, we collected data on institutional and insider money flows, and identified a list of names that have seen bullish sentiment from these two groups.
Not sure what these terms mean? Don't fear -- we're going to explain each term clearly. If you want to skip ahead, the complete list is below.
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. Companies with higher market cap are considered to have more trustworthy information because they have greater histories of profitability and data.
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).
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.
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.
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 new knowledge of these terms, use this list as a starting point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)
1. Midway Gold (NYS: MDW) : Engages in the acquisition, exploration, and development of mineral properties in North America. Market cap at $216.53M, and price at time of writing at $1.87. Net institutional purchases in the current quarter at 10.7M shares, which represents about 14% of the company's float of 76.41M shares. Over the last six months, insiders were net buyers of 100,000 shares, which represents about 0.13% of the company's 76.41M share float.
2. Capital Bank (NAS: CBKN) : Operates as the holding company for Capital Bank that provides general commercial banking products and services in North Carolina. Market cap at $157.87M, and price at time of writing at $1.97. Net institutional purchases in the current quarter at 861.6K shares, which represents about 6.17% of the company's float of 13.97M shares. Over the last six months, insiders were net buyers of 99,652 shares, which represents about 0.71% of the company's 13.97M share float.
3. Valence Technology (NAS: VLNC) : Develops, manufactures, sells, and supplies high-energy power systems in the United States and internationally. Market cap at $157.77M, and price at time of writing at $0.98. 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.
4. Seacoast Banking Corp. of Florida (NAS: SBCF) : Operates as the holding company for Seacoast National Bank that provides various financial products and services in the United States. Market cap at $131.89M, and price at time of writing at $1.37. 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.
5. Identive Group (NAS: INVE) : Provides products and solutions in the areas of physical and logical access control, identity management, and radio frequency identification (RFID) to governments, commercial and industrial enterprises, health care organizations, and consumers worldwide. Market cap at $108.73M, and price at time of writing at $1.99. Net institutional purchases in the current quarter at 5.7M shares, which represents about 13.04% of the company's float of 43.72M shares. Over the last six months, insiders were net buyers of 36,636 shares, which represents about 0.08% of the company's 43.72M share float.
6. The McClatchy Company (NYS: MNI) : Operates as a newspaper publisher in the United States. Market cap at $107.35M, and price at time of writing at $1.30. 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.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Eben Esterhuizen does not own any of the shares mentioned above. Insider data sourced from Yahoo! Finance, institutional data sourced from Fidelity.
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