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 GrowGeneration Corp. (NASDAQ:GRWG) 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).
A farmer placing an accessory into a hydroponic system, filled with a nutrient-rich growing media.
GrowGeneration Corp. (NASDAQ:GRWG)
Number of Hedge Fund Holders: 6
GrowGeneration Corp. (NASDAQ:GRWG) is a leading specialty retailer of hydroponic and organic gardening products in the United States. The company operates over 30 retail and distribution centers across multiple states, with a product range encompassing nutrients, additives, growing media, advanced lighting technologies, and environmental control systems, catering to both commercial and home growers. Through their website, the company offers an extensive online superstore with over 10,000 products available for nationwide shipping. The company also provides turnkey facility designs, cultivation room designs, and on-site project consultations, aiming to enhance yields and reduce production costs for cultivators. GRWG is one of the best penny stocks with insider buying.
GrowGeneration Corp. (NASDAQ:GRWG) reported Q3 2024 net revenue of $50 million, slightly down from $53.5 million in Q2 2024, primarily due to planned store closures under their restructuring initiatives. The company achieved significant milestones, including the first positive same-store sales growth of 12.5% in three years. Proprietary brand sales increased to 23.8% of Cultivation and Gardening net sales, up from 19.4% last year, demonstrating progress toward their target of 35% by the end of 2025.
GrowGeneration Corp. (NASDAQ:GRWG) has completed its store rationalization plan, reducing its footprint from 65 stores to 31 operational locations. The company maintains a strong financial position with $55.2 million in cash and no debt as of September 30, 2024. It is also implementing a digital transformation strategy, including a B2B e-commerce portal launch in Q4, aimed at streamlining operations and enhancing customer experience. Management reiterated their full-year 2024 guidance for net revenue between $190 million to $195 million. The restructuring initiatives are expected to improve profitability and reduce expenses by a minimum of $12 million on an annualized basis, which may have positive effects on the stock price, as hinted by at least 2 insiders buying more than $100,000 worth of company stock in the last six months.
Overall, GRWG ranks 8th on our list of penny stocks with insider buying in 2025. While we acknowledge the potential of GRWG 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 GRWG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.