Insider Monkey
10 Micro-Cap Healthcare Stocks Insiders Are Buying
Fahad Saleem
8 min read

In This Article:

In this article, we will take a detailed look at the 10 Micro-Cap Healthcare Stocks Insiders Are Buying. For a quick overview of such stocks, read our article 5 Micro-Cap Healthcare Stocks Insiders Are Buying.

Investors have always been interested in the connection between insider buying and stock returns. Over the past several years there’s been a huge influx of academic research and papers exploring insider trading and stock returns. For example, The Wharton’s Rodney L. White Center for Financial Research published a research paper back in 1999 entitled Estimating the Returns to Insider Trading. The paper used publicly available insider trading data from 1975 through 1996 and found that purchase portfolios post “abnormal returns” of more than 50 basis points per month. The research paper defined “purchase portfolio” as a stock portfolio that holds all shares bought by insiders for a six-month period. As opposed to purchase portfolios, the research found that sales portfolios do not show any significant abnormal returns. This is something verified by other studies and insider trading experts who repeatedly talk about why investors should not pay too much attention to insider selling and instead focus all their resources to insider buys.

Can Insider Purchase Portfolios Beat the Market?

An important point highlighted in the research said about one-quarter of the abnormal returns posted by purchase portfolios were recorded within the first five days after the initial transaction, and one-half accrued within the first month. The research paper also said that purchase portfolios outperform the market by a whopping 10.2% per year. About one third of these gains come from high beta stocks, small-cap stocks and “value” stocks, according to the research paper. We have previously discussed some relevant research on this theme showing how insiders enjoy more gains by buying small-cap stocks when compared to large-cap stocks. This could be because of the market’s propensity to overlook smaller companies and focus on large-cap companies. Insiders take advantage of this and keep piling into their company shares until they gain the broader market’s limelight.

A "Red Flag" in Mark Zuckerberg's Selling of Meta Platforms Stock

Moving beyond academic research, how’s the insider trading space looks like in 2024? Is insider sentiment positive or negative this year? Ben Silverman, director of research at Verity Platform, while talking to CNBC in February, said that something related to Mark Zuckerberg’s selling of Meta Platforms shares concerned him. Silverman said that the stock jumped higher in February and there was an “acceleration” noted in insider selling from Zuckerberg who had been seeing Meta Platforms shares daily since November last year. Silverman said that this was a “red flag” that actually made him “cautious” since Zuckerberg was doing daily pattern sales but suddenly increased selling after Meta’s shares rose.

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