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 Sunnova Energy International Inc. (NYSE:NOVA) 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 residential home showcasing the success of a solar energy system installation.
Sunnova Energy International Inc. (NYSE:NOVA)
Number of Hedge Fund Holders: 19
Sunnova Energy International Inc. (NYSE:NOVA) is an energy services company specializing in residential solar and energy storage solutions. Collaborating with local dealers and contractors, NOVA offers services such as operations and maintenance, monitoring, repairs and replacements, equipment upgrades, and onsite power optimization. Their product portfolio includes add-on battery storage, home solar protection plans, new solar battery storage, and various other solar systems.
The recent Q4 2024 presented significant challenges for Sunnova Energy International Inc. (NYSE:NOVA), marked by peer distress, high interest rates, and regulatory uncertainties that made both consumers and capital providers more cautious. The company faced slowdowns in tax equity flow, which impacted capital deployment and resulted in 2024 cash generation falling below expectations. Despite these challenges, NOVA achieved notable operational improvements, including a 24% reduction in net service expense per customer over two years, while reducing total work orders by 12% and growing their cumulative solar customer base by over 70%.
Sunnova Energy International Inc. (NYSE:NOVA) has also taken strategic steps to strengthen its position, including prioritizing margin over growth, focusing on high-margin energy services, and implementing price increases to offset higher capital costs. Significant cost-cutting measures were implemented, including a 15% headcount reduction expected to contribute approximately $35 million towards total estimated annual cash savings of $70 million. In terms of financing, NOVA secured substantial asset-level funding in 2024, including $1.8 billion in solar asset securitizations and $1.3 billion in tax equity, marking the first year without issuing corporate level capital. Looking forward, the company is focusing on addressing its late 2026 corporate debt maturities by mid-2025, while maintaining its commitment to customer service quality. In the last six months, at least two insiders bought significant amounts of the company’s stock, which signals that NOVA’s struggles may be in the rear-view mirror.
Overall, NOVA ranks 2nd on our list of penny stocks with insider buying in 2025. While we acknowledge the potential of NOVA 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 NOVA 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.
