We recently published a list of 12 Penny Stocks with Insider Buying in 2025. In this article, we are going to take a look at where 374Water Inc. (NASDAQ:SCWO) stands against other penny stocks with insider buying in 2025.

Insider trading can be a reliable signal for gauging the degree of confidence that management has in the future of their company. This practice has been supported for decades by leading investors and analysts, who claim that there is only one reason for insiders to buy shares of their own companies – if they strongly believe the share prices are going to rise significantly. We discussed the theory behind insider buying in one of our recent articles named 10 Large-Cap Stocks with Insider Buying in 2025.

Insider buying can be an even more significant signal in the case of penny stocks, which are usually small- or micro-cap companies, because these stocks are often underfollowed or not followed at all, leading to significant price inefficiencies and overreactions from investors. This, in turn, may create pockets of opportunity that insiders exploit by leveraging their confidential information and visibility. Furthermore, given the smaller market cap, insiders can exert significant upward pressure on the stock price, which may help boost morale among shareholders.

READ ALSO: 10 Technology Stocks with Insider Buying in 2024

Empirical studies suggest that small caps tend to underperform relative to large caps during tough economic conditions, such as slowing GDP growth, inflation, high interest rates, and other exogenous pressures. Many believe that the US has already entered a new regime, called “Trump 2.0,” which will be dominated by higher inflation, lower economic support from government spending, and reduced availability of cheap labor, among several other possible challenges. Some surveys have hinted at a deteriorating business outlook among small- and mid-sized businesses, marked by lower CapEx budgets. Yardeni Research charts show that small-cap forward earnings have lagged significantly behind large caps since 2023. On top of that, the new economic regime in the US could further exacerbate these discrepancies and lead to greater relative underperformance of small caps, including penny stocks.

While the aforementioned developments could be bad for existing penny stock investors, they could also create investment opportunities for new investors. As the US broad market is still trading near its all-time highs, it has become increasingly difficult to find undervalued or even fairly valued large- and mid-cap companies. In such an environment, investors seeking higher returns may turn to smaller, lesser-known stocks with strong growth potential. The key takeaway for investors is that penny stocks could offer much more attractive, high-upside opportunities than large caps, and watching insider buying signals provides further reassurance regarding stock picking.

Our Methodology

We used Insider Monkey’s insider trading stock screener to find penny stocks trading under $5.00 share price with at least two insiders buying shares worth at least $100,000 in the last six months. We believe that multiple insiders buying significant amounts of stock represents a higher chance that insiders have high confidence in the company. For all the companies, we also include the number of hedge funds holding stakes in them, tracked by Insider Monkey as of Q4 2024. The stocks are ranked according to hedge fund positions.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

374Water Inc. (NASDAQ:SCWO)

Number of Hedge Fund Holders: 1

374Water Inc. (NASDAQ:SCWO) is a US-based cleantech company specializing in innovative waste and wastewater treatment solutions. Founded in 2018, the company has developed the patented AirSCWO™ technology, which stands for Air Supercritical Water Oxidation. This process effectively treats both hazardous and non-hazardous organic waste streams by oxidizing contaminants at high temperatures and pressures, resulting in safe, dischargeable water, mineral byproducts, vent gas, and recoverable heat energy. The technology has undergone extensive testing at bench, pilot, and commercial scales, demonstrating enhanced performance and safety. By transforming waste into minimal impact, value-added products, SCWO aims to support a circular economy and assist businesses and local governments in achieving their Sustainable Development Goals.

374Water Inc. (NASDAQ:SCWO)’s technology is positioned to address critical waste challenges with a solution that offers unmatched commercial efficacy and scale. The company has made substantial progress in commercializing its technology across both solid and liquid waste streams, building a robust backlog and pipeline of opportunities totaling more than $1.8 billion. The company’s AirSCWO system effectively processes solid waste that can be preprocessed into slurries for treatment, including wastewater sludges, biosolids, spent granular activated carbon, ion-exchange resins, and hard-to-degrade plastics, as well as liquid waste such as firefighting foam, industrial solvents, and foamate streams.

374Water Inc. (NASDAQ:SCWO) has also demonstrated significant success in AFFF destruction tests on their lab-scale system and commercial scale AS1 and AS6 systems, achieving 99.999% plus destruction results. The company operates in multiple market segments including the $120 billion US drinking water and municipal wastewater management market, the $15 billion US federal waste management market, and the $80 billion US industrial waste management market. The company is actively raising capital to expand operations and is pursuing near-term revenue opportunities across AirSCWO capital sales, emerging Destruction as a Service business model, destruction demonstrations, and lab tests. The significant insider purchasing in the last six months further reinforces the strong outlook and reinvestment opportunities of the company.

Overall, SCWO ranks 12th on our list of penny stocks with insider buying in 2025. While we acknowledge the potential of SCWO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SCWO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.