Small-cap stocks provide opportunity but are riskier than average stocks due to their relatively untested business, competition, and market conditions. Investors can mitigate the risk by due diligence, including tracking the insider, institutional, and analyst sentiment, which helps weed out the chaff, leaving only the kernels of opportunity behind. Today, we’re looking at three small and micro-cap technology stocks insiders buy to see what opportunities they present.
IZEA Worldwide, Inc: SaaS for Influencers
IZEA Worldwide (NASDAQ: IZEA) operates a cloud-based platform connecting brands with content creators, AKA influencers. Its platform helps creators manage marketing campaigns, track expenses, and process payments, among other services. Its insider trading activity is notable because insiders haven’t done much buying or selling for the last few years, but activity suddenly spiked in Q2 this year. Major shareholder GP Investments dropped nearly $4 million into the stock this quarter to bring its holding to roughly 18% of the stock. GP Investments is a Latin America-based alternative investment firm listed on the Luxembourg exchange.
Institutional holdings other than GP Investments are small. The group owns about 15% of the stock, and the activity is mixed. Institutions were buyers in Q1 2024 but have been selling in Q2, coincident with the recent market top. Insidertrades.com tracks no analysts with ratings on this stock. Opportunities for investors include the growth outlook. The company is expected to return to growth later this fiscal year and to accelerate in 2025. The caveat is that profits aren’t expected until 2026 at the earliest for this microcap stock. The company is well-capitalized with no debt and can theoretically sustain operations until then.
TruBridge, Inc: Bridging Outcomes in Healthcare
TruBridge (NASDAQ: TBRG) is a small-cap tech in the healthcare field, providing SaaS services, consulting, managed IT services, analytics, business intelligence and others. It was recently IPOd under its new name to relative success and has sustained a moderately stable price. The company is formerly known as Computer Programs and Systems.
Insiders buying this stock include two major shareholders, Pinetree Capital and L6 Holdings, which hold more than 10% between them. L6 Holdings is a private equity firm focused on the lower middle market and technology; Pinetree Capital is a value-oriented investment firm focused on enterprise software. Insiders, not including major shareholders, own more than 3.5% of the stock, while institutions hold a larger portion of nearly 90%.
Analysts' activity is noteworthy. Insidertrades.com tracks two analysts with ratings on this stock, and they have set a wide range for the stock price. The takeaways are that the sentiment is a solid Buy with a price target nearly 100% above the current action. The lowest target is $13 and offers a near-50% gain for investors.
NextNav Navigating a Tough Market
NextNav (NASDAQ: NN) offers a next-gen positioning service through its flagship product, Pinnacle. Pinnacle is a platform providing vertical positioning in metropolitan environments. Insiders buying this stock include director Neil S. Subin and major shareholder Joseph D. Samberg of JDS Capital Management. Insiders own about 7.5% of this stock, and the position is growing despite persistent sales by the CFO, CAO, and SVP. Institutional activity is notable because of the market's 80% interest and depth. Top holders include Corre Partners Management and Legion Partners Asset Management, which hold roughly 20% of the stock.
No analysts rate this stock, and short-selling is a concern despite the outlook for revenue to more-than-double next year. Short interest was above 10% in mid-May and ramped higher sequentially along with the share price. The stock now shows signs of resistance at a critical level and deteriorating technicals. MACD and stochastic are weakening and could lead this market to another 15% decline.
