Whether you want to invest in penny stocks or just find a few to buy and sell on the same day, your strategy matters. Understanding how to trade, manage risk and implement said strategy goes hand in hand with this. So where to start ? Today’s article takes a look at a handful of cheap stocks to buy using the “follow the money” strategy.
Follow the monetary strategy: what is it and how to use it?
What is the “Follow The Money” strategy? This type of investment approach involves tracking big money transactions in public companies. For this article, we’ll cover penny stocks with insider buying. But, in general, the Follow The Money strategy can include hedge funds and major shareholders of any company. The first place to look to track the money is in SEC filings. Here are some of the types to look into and what they tell you as an investor:
Filing of Form 4
According to the Securities and Exchange Commission, Form 4 is a “Statement of Change of Beneficial Ownership”.
It must be filed with the commission whenever a material change occurs in a company’s insider holdings.
Filing of Form 3
Form 3s are filed when a person becomes an insider. Examples of this include new hires brought in as officers or directors of a company. This form indicates the initial ownership position in the securities of the company and is filed within ten days of becoming an insider.
Schedule 13D, Schedule 13G and Schedule 13F Filings
These schedules involve parties claiming to own shares of more than 5% of a particular class of shares in a company. The SEC defines Schedules 13D and 13G as Beneficial Ownership Reports: “The term “beneficial owner” is defined under the rules of the SEC. It includes anyone who directly or indirectly shares voting or investment power (the power to sell the security).
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These deposits would be highlighted by traders looking for “whale” trades as they usually connect to large funds or investment trusts.
- A Schedule 13D is filed by an “active investor” and an owner of more than 20% of the outstanding shares of a corporation.
- A 13G refers to “passive investors” holding less than 20% of a company’s outstanding shares. Once a “passive investor” reaches over 20% OS, they must begin filing 13D returns. These are important because we will see which large funds or investors take a larger position in a company. These generally increase sentiment for a given company.
- Schedule 13F repositories are where the fun gets. 13Fs are quarterly reports that must be filed by institutional investment managers with at least $100 million in assets under management.
You can read more about filings in the article Penny Stocks & Due Diligence: Understanding Important SEC Filings.
All of these deposits have different levels of importance for different traders. Today we’re looking at penny stocks with insider buying, so Forms 4 will be the flavor of the day for our “Follow the Money” strategy.
Penny Stocks to Buy [according to insiders]
- Comera Life Sciences Holdings (NASDAQ: CMRA)
- Canoo Inc. (NASDAQ: GOEV)
- Reliance Global Group Inc. (NASDAQ: RELI)
Comera Life Sciences Holdings (NASDAQ: CMRA)
Look at any CMRA stock chart, and you’ll likely see a penny stock traded sporadically. Since its public debut in May, volatility has become an important part of the market’s trading trend in 2022. the action. First mid-June, then late July, briefly late August, and now this has been the busiest week of September. Whether or not you subscribe to things like this is secondary to what happens with Comera Life Sciences.
The company develops “bio-innovative” drugs specifically targeting the self-injectable care market. Late last month, Comera announced a purchase agreement of up to $15 million with Arena Business Solutions to purchase CMRA stock. CEO Jeffrey Hackman explained, “The line of credit provides the opportunity to invest in our pipeline and our proprietary formulation platform, SQore™, which is designed to transform intravenous biologics into subcutaneous versions that patients can be self-administered in a single dose.
But what has become an even bigger catalyst for the penny stock is based on insider activity. Directors and management purchased CMRA shares between Sept. 9 and Sept. 12, totaling more than 122,000 shares at average prices between $1.93 and $2.13. Insider buying from several insiders brought more bullish sentiment to the company in the stock market this week.
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Canoo Inc. (NASDAQ: GOEV)
Electric vehicle startup Canoo Inc. is no stranger to big stock market moves. In early July, shares of GOEV surged from $1.75 to a 52-week low of $5. This higher level appears to have been a clear resistance level after GOEV stock failed to break above it on several occasions.
Its list of transaction feeds includes organizations such as NASA, the US military, and even grocery chain Walmart, to name a few. Its latest deal with Walmart, in particular, will see the company make advanced deliveries to finalize a custom-configured vehicle for the company. CEO Tony Aquila explained in an August update: “Our LDV has been designed to enable a wide range of package deliveries, including refrigerated items, groceries and general merchandise – and to do so efficiently, emission-free and with a high level of driver comfort and ergonomics.And we turned many heads in the neighborhoods by passing in our uniquely identifiable vehicles.
But Aquila is in the spotlight for something else right now. This “something” is his latest insider trading activity on GOEV shares. This week, the CEO filed a Form 4 showing the purchase of another 200,000 shares at prices ranging from $2.54 to $2.68 and were purchased under a trading plan adopted by Aquila in June. His investment was in addition to his August purchase of 200,000 GOEV shares.
Thanks to this latest trade, GOEV stock landed itself on the list of Follow The Money stocks to watch right now.
Reliance Global Group Inc. (NASDAQ: RELI)
AI-powered insurance company Reliance Global has quietly made a 44% return in the past few weeks. The move comes after months of slowly hemorrhaging to 52-week lows of $0.6802 from highs of over $10 earlier in the year. Reliance and other insurance stocks came under pressure from the rest of the market.
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In the case of Reliance, the company has been working to establish new partnerships to further expand its revenue model. The latest collaboration stems from a referral deal with NRS Funding. Both will leverage Reliance’s RELI Exchange network to provide merchant cash advance services to customers. Management hopes this latest affiliation will contribute to its current revenue model.
In the last quarter, the company achieved a 92% increase in revenue, with sales increasing from $2.19 million to $4.2 million; 2021 vs 2022. But it’s more than financial performance that has recently turned heads for RELI stock. September was a busy month for insiders, especially company CEO Ezra Beyman. His last purchase was over 200,000 shares in trading activity worth nearly $200,000. This increased his holdings to more than 4.8 million shares.
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