Three Penny Stocks Insiders Are Buying

| April 4, 2014 | 0 Comments

One way to find penny stocks that may be poised for a rally is to look at recent insider transactions.  When corporate executives and directors buy their company’s shares on the open market, it can be a huge sign that the stock is headed for higher prices.

After all, nobody has a better handle on a company’s prospects than those charged with running the operation.

With that in mind, I conducted a review of recent insider transactions to see if there were any penny stocks with an uptick in insider buying.  Here are three that had strong buys by insiders in recent days…

Destination XL Group (NASDAQ: DXLG)

Willem Mesdag, a director of Destination XL Group, purchased big chunks of DXLG on six separate occasions over the past couple of weeks.  All in all, he bought 2,684,300 shares at prices ranging between $5.37 and $5.73 per share. 

The total cost of these buys came out to just over $15 million.

There’s no question the purchases represent a huge investment by Mr. Mesdag.  But what’s even more interesting is that he more than doubled his position in DXLG in a very short period of time.

Does he know something we don’t?

A review of the company’s 2013 numbers shows that the retailer of big and tall men’s apparel had a difficult year.  Revenue declined 3% year-over-year to just under $388 million.  And the company went from posting net income of $6.1 million ($0.13 per share) in 2012 to a net loss of nearly $60 million ($1.23 per share).

According to management, the company’s struggles are related to a multi-year transition of the business. 

The company is closing its Casual Male XL stores and opening more Destination XL stores.  While this change in direction is clearly costing the company sales and profits in the near-term, it should boost the company’s growth rate for the long run.

The transition is expected to be complete by 2017.

Perhaps this is an opportune time for more patient investors to establish positions in DXLG.  While the stock is down 12% year-to-date, it has gained 82% over the past two years.

Unwired Planet (NASDAQ: UPIP)

UPIP is another penny stock that has recently experienced strong insider buying.  On March 24th, Director Michael Mulica purchased 100,000 shares of UPIP at $2.00 per share.  The total cost of the transaction was $200,000.

While not a multi-million dollar purchase, the transaction did increase Mr. Mulica’s holdings in UPIP by a hefty 26%.

Another interesting fact here is that Mr. Mulica made the purchase after the company announced huge news.  On March 20th, the intellectual property and technology licensing company said it sold a portfolio of patents to Lenovo Group for $100 million in cash.

As you might have guessed, UPIP jumped on the news.

After a one-day pop of 49% when the news came out, UPIP has continued to move higher.  As I write, the stock is changing hands at $2.06 per share.  That’s 58% higher than where it closed the day prior to the announcement.

But it may not be too late to participate in this rally.

While the shares have surged in the past several days, Mr. Mulica’s purchase suggests the stock has more upside.  After all, UPIP is trading just 6 cents above the price per share Mr. Mulica paid last week.  He clearly feels $2.00 per share is good price to pay for the stock.

CTI Industries (NASDAQ: CTIB)

Insider John Schwan just made his biggest single purchase of CTIB stock in almost two years.  On March 28th, the Chairman and CEO of CTI Industries bought 32,649 shares at a price of $5.36 per share. 

The total cost of the transaction was $174,999.

The purchase increased Mr. Schwan’s holdings of CTIB by just 5.5%.  However, he is the company’s largest shareholder with a nearly 20% stake in the business.

It appears Mr. Schwan finds the current share price attractive after the company’s performance in 2013. 

For the year, revenue increased 13.2% to $56 million, a new all-time record high for the company.  Net income rose 269% to $376,000.  And earnings quadrupled year-over-year to $0.12 per share.

No too shabby!

CTI Industries manufactures flexible film products for novelty, packaging, and container applications worldwide.  Last year’s results were boosted by strong sales in the company’s pouch and container line.  

What’s more, analysts are bullish on the company’s prospects over the next two years.  They’re forecasting earnings growth of 142% in 2014 followed by a 79% rise in 2015.

No question about it, those are strong growth projections for CTIB.

Despite the favorable 2013 results and bullish outlook, CTIB has been moving lower since January.  However, the decline could be a terrific buying opportunity.  With CTIB trading at $5.36 as I write, you can pick up shares for the same price paid by the company’s CEO last week.

Profitably Yours,

Robert Morris 

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Category: Penny Stocks

About the Author ()

Robert Morris is the editor of Penny Stock All-Stars, an investment advisory focused on discovering small-cap and micro-cap stocks that are destined to become the market’s next Blue Chips. The Wall Street veteran and small-cap stock specialist is also a regular contributor to Penny Stock Research. Every week, Robert shares his thoughts with our readers on a variety of penny stock-related topics. In addition to Penny Stock Research, Robert also writes frequently for two other free financial e-letters, ETF Trading Research and the Dynamic Wealth Report. He’s also the editor of two highly successful and popular investment advisories, Biotech SuperTrader and China Stock Insider.

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