In this article, we will take a detailed look at 10 Small–Cap Stocks Insiders Are Selling Recently. We previously covered 10 Small–Cap Stocks Insiders Are Buying Recently.
Why are some investors focusing on stocks with smaller market capitalizations? Among some of the reasons are diversification of their portfolios, because small-cap stocks usually operate in different industries than large-cap companies. Another reason is the share price, which is often lower than that of companies with larger market capitalization (above $10 billion), making them more affordable.
Some investors’ strategy is finding nascent companies with strong growth potential, which can bring high returns once the companies have grown. Even though small-cap stocks often carry higher risks and are more prone to market volatility, they also offer investors more room for growth.
What are some ways to assess small-cap stocks that are worth investing in? While there’s no single simple or complicated rule that investors can follow to achieve secure results, some strategies can help. One strategy is to keep track of insider trading activity. Insiders or, in other words, people in high positions within companies, such as CEOs, CFOs, directors and other executives have valuable insights into the company’s strategic moves, plans, and initiatives. A CEO’s investment in a company’s stock can sometimes signal strong confidence in the company’s future.
Does this mean that it is a bad sign for the company when insiders sell their shares? Not necessarily; just like insider buying activity doesn’t always mean stock is heading for growth. When insiders are selling their shares, it can sometimes mean that the management is losing confidence. On the other hand, it also happens that large shareholders just want to trim their holdings to more appropriate position sizes based on the risk/reward. Insiders can also decide to sell their shares due to personal financial reasons that have nothing to do with the company.
While both insider selling and buying can be driven by various motives, it’s important to consider these moves within the broader context of the company’s fundamentals, industry trends, and overall market conditions.
To identify the 10 large-cap stocks insiders are selling recently, we considered only stocks with a market capitalization of between $250 million to $2 billion. We first used Insider Monkey’s insider trading stock screener and looked for stocks with at least two insiders selling over the last two months.
With each stock we note the number of recent insider sales and the company’s current market capitalization. But why is it important to follow insider activity? Our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds, focusing on insider trading and stock picks from hedge fund investor newsletters and conferences. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A trader in a suit and tie intently studying real time stock market data in a modern trading room.
10. Enfusion, Inc. (NYSE:ENFN)
Number of insiders selling: 6
Market capitalization: $1.063B
Enfusion is a provider of software-as-a-service solution services with a focus on the investment management industry. It simplifies investment management operations by connecting front, middle and back-office functions under one cloud-native SaaD platform. The Chicago, Illinois-headquartered fintech company offers several professional tools such as Portfolio Management System and Order and Execution Management System.
Over the past two months, six insiders, among which are the company CEO, and CFO, sold around $372,671 worth of Enfusion shares at an average price of $10.26 per share. Since the beginning of the year, the stock gained 7.57% and is now trading at $11.08 per share.
As many as five of these insider sales happened on January 7, just six days before Enfusion announced it has signed an agreement to be acquired by Clearwater Analytics (NYSE:CWAN) in a deal worth approximately $1.5 billion. This could indicate that several insiders might have decided to sell their shares before the sale of the company. Why? There can be uncertainties about the acquisition deal and concerns about the future’s prospects. Or, some investors might have sold their shares out of fear the price might drop after the acquisition.
How do analysts feel about the deal? In January, Morgan Stanley (NYSE:MS) downgraded the rating on Enfusion stock from “Overweight: to “Equal-weight, and also raised the price target to $11.25 from $11.00. The downgrade came in response to the announced acquisition, writes Investing.
According to data from StockAnalysis, five analysts have an average “Hold” rating on Enfusion stock, and the 12-month price target is set to $10.38.
On the other hand, eight analysts have an average “Buy” rating on Clearwater stock and the 12-month price target is $31.75. Clearwater shares are currently trading at $27.51 per share.
9. PubMatic, Inc. (NASDAQ:PUBM)
Number of insiders selling: 7
Market capitalization: $756.625M
PubMatic, a digital advertising technology company is ninth among 10 small-cap stocks insiders are selling recently. The Redwood, California-headquartered company provides solutions to enable publishers to enhance the value of their digital advertising inventory.
Over the last two months, and also at the beginning of February, seven insiders sold a total of around $2.03 million at an average price of $15.09 per share. Among those seven insiders was the company CEO, K. Rajeev Goel, who sold 75,513 shares worth around $1.14 million, reducing his ownership to 5,896 shares.
As many as nine analysts have the average “Buy” rating on PubMatic stock, and the 12-month stock price target is $20, representing an increase of 28.87% from the latest price, according to data from MarketBeat.
Since the beginning of the year, PubMatic shares gained 5.58%, now trading at $15.52. Over the past 12 months, the stock went slightly up – 3.72%, while over the last five years, it has lost 38.06%.
In December, the company announced an expansion of its collaboration with Western Union to include its commerce media business. The same month, PubMatic also expanded its global partnership with GroupM Premium Marketplace.
For the third quarter of 2024, PubMatic disclosed revenue of $71.8 million, up 13% year-over-year. Its gross profit grew year-over-year by 23% to $46.3 million, but the company also reported GAAP net loss of $900,000, which compares to GAAP net income of $1.8 million in the same quarter of the prior year.
