3 Tech Stocks Under $5 Insiders Are Buying NOW

The great rotation into small caps is happening now and insiders are buying these three tiny stocks. Joining us today is market beat analyst Thomas Hughes with a list of three micro cap companies all in the tech or AI sector where there are insiders buying strongly right now. But just because insiders are buying does that mean you should be buying too? Thomas, before we get to the names, let's talk about what is happening with small caps and why we keep seeing a lot of success in the Russell. >> Well, right. So, uh, we're kind of amid this big fundamental shift in the economy. It's been going on for years just where we hit max interest rates a year or so ago and the Fed has been lowering rates and we see some tailwinds developing with deregulation and, you know, favorable business taxes. Headwinds still in place for sure, but this is causing a shift in in market dynamics and investors are taking on more risk. At the same time, all those big tech stocks were at really high high valuations. So, for the last couple quarters, investors have been taking profits off the table in names like Nvidia and Microsoft and Oracle, these big high-flying tech names, and putting it into other areas. A lot of that's been into small caps. If you look at the Russell, it's been trading at record highs, been setting new highs for the past few weeks. Uh, is throwing off pretty strong signals and is leading the market generally speaking. Uh, on up days, it's moving higher. On down days, it's sometimes not even moving down at all. and certainly outperforming the other indices um you know in a very conspicuous way. >> This rotation is new like you said the last couple of weeks prior to that with the Iran war and the conflict that we saw happening where the market started to go down a lot of these small cap names were hit the most. So let's talk about volatility as we talk about small caps as well. >> Well right that's just due to the speculative nature of these stocks. Um a lot of them have no revenue or just emerging into revenue. Many of them don't have profits if they do have revenue. A lot of the stock price action is based on the future outlook. So, anything that kind of uh knocks the market's vision off of the high level uh will certainly be impacted in the stock price and that's what we see in the volatility. >> Yeah, a lot of that volatility can happen minute to minute. They can have big swings all within the span of a few hours. And so, as we're recording this video right now, these are three small cap, really micro cap names, all under $5. That could change by the time this video posts a few hours later because of the the volatile nature of these names. But let's get into it. We're talking again about the the way you found these stocks is looking at stocks that insiders are buying. Why is that something that you look at? >> Well, insider buying can be a sign of confidence in the company. Insiders typically already own shares of the stock. They don't have to buy more shares, especially companies that use sharebased compensation. And so when we see insiders buying especially in large amounts um contrary to trends or when they haven't done any buying or selling for quite a long time it can be a sign of change. So these stocks did turn up on market beat screener for insider buying stocks just moving from there. You just kind of look in to see what's going on and what you know what's driving the buying. >> Yeah, always important to look into the why those insiders might be buying. You can also look at why insiders might be selling. That's another important metric that can signal something might be going on with a stock. If you want to check out a list of 12 stocks that corporate insiders are selling right now, make sure to check out this free special report Thomas wrote on the 12 stocks corporate insiders are abandoning right now. You can scan the QR code or click the link in the description to get that stock list on marketbeat.com right now. All right, Thomas, let's get on to the list of stocks you have today that insiders are buying. These are three tiny companies all in the tech space. But just because the insiders are buying doesn't mean they're necessarily a buy for you today. We're going to do a full analysis of these three companies. Let's start with the first stock on your list. >> Right. That's Calura. They've been around for a while. They're in videos, cloud-based videos for for businesses and for for customer experiences. But they're made a big shift right now. they're trying to shift into AI, trying to launch AI platform, really drive themselves as a customer and an employee experience platform to where uh say you search for a website, you know, or you're doing some kind of a internal training or whatever, instead of a static page, this thing is is reading the situation and taking you through this experience versus just reading a page on on the paper. So insiders are buying. Um insiders own like over 10% of the stock. So that's pretty significant amount. We've got the CEO and an executive vice president both doing the buying which is also a good sign. Uh there is an offset though because there is a board member who's been selling pretty heavily. This is also one of the very largest shareholders. So this person is definitely just trimming down their position. But within that there are some other signs uh that this stock could be viable right now. And that includes the institutions. They don't own a lot of the company, only 30%, but that's quite a lot for such a small speculative name, and they have been accumulating shares recently. >> Yeah, I think that that's a metric that stood out to me with this one, too, is that 30% isn't a lot for some of the names we talk about, but for how small this company is, market cap of about 180 million right now. 30% on a tiny company is actually u somewhat significant to look at, right? >> The other thing to talk about with this one is just the chart action recently. Why has this one been down 25% this year? Is there anything behind the downtrend in the stock price? >> Well, this is just, you know, the legacy business kind of floundering around the company not really sure what's going on and then making plans for this shift. So, uh certainly the stock price is down, but it looks like we have a bottom in place. There could be a little bit more downside before we get the really strong rebound. Uh but it does look that we're down near, you know, rock bottom levels. So, on a percentage basis, there could be a pretty big percentage drop. longer term based on the trading range uh if we get some positive news this one could bounce back pretty strongly >> if you look at what the analyst has to say and again I think this is the opinion of maybe one or two analysts uh it looks like it has a lot of upside looking at market beat's website it's showing over 100% upside for this stock what do you think about the the couple of analyst price targets on this one >> so what I see in this is that we've got two analysts covering it we're pegged at a hold but that's one buy and one sell so that's a pretty wide range of targets Uh the analyst covering includes you know wise ratings that we talked about a reputable firm uh but more focused in other markets. This is probably a technically generated rating and that was issued way back in December. Uh so the most recent rating is that buy from Nem. They're pointing to a $3 price target which is 115% upside but with just one analyst covering the stock. It's not really a high conviction rating right now. One of the catalysts for higher price action would be some good news that would either invigorate the analysts that are covering the stock to raise price targets or bring some new ones into the mix. >> And speaking of good news, I do want to look at the earnings really quick because it looks like they had a small beat that actually has them somewhat profitable. >> Well, right. So, right now they're amid this transition and they are turning to profits. So, again, upcoming news will probably be good. Uh but being such a high-risisk play, you're going to want to wait for that news to come through before you start buying the stock because it could just as well be bad news as good news. >> Yeah, that's a good cautionary tale looking especially at small cap companies like this one. Let's get on to the second name that you are talking about. This one's a slightly bigger name. >> Yeah, this is Thrive. Uh they're also a digital marketing platform. They serve ads across a variety of metrics and they are also amid an AI transition. They're turning their legacy business more into an AI powered one. recently launched AI platform. Uh it seems to be gaining traction. Uh this company can also profit which is very good. Uh with these AI tools in place, it's possible that this company could enter a stage a period of like sustainable growth and sustainable profitability. One of the things that really stood out to me in the last earnings report uh was them talking about their customer pivot. They specifically they called themselves out saying we've been relying on legacy business to drive our revenue and our growth and now they're just leaving that behind. They've embarked on a a really a go-to market strategy where they're actively marketing this new platform and I think that that's going to be reflected in the upcoming results. >> It appears analysts agree with you. This one has a pretty strong upside from analysts as well and quite a few more analysts who are covering it. Uh let's talk about what the analysts are saying of where this price target should be for this stock versus where the stock is actually right now. The the chart action is pretty difficult on this one. Down uh roughly 70% in a year. Not a great chart looking at it. So why do we see such bullishness from analysts? >> Well, right. Again, this is another market that's been struggling with legacy business and now it's amid that shift. So as far as the analysts go, um you're right, there are seven that we're tracking right now. So that gives us far more conviction in the rating. They also rate as a hold. Uh but there's actually more hold ratings and more buy ratings in the mix and that consensus price target is 950. That's forecasting 180% upside. The risk right now is that the trend is has been down. They've been reducing their price target. So they're leading to a below consensus level. The catalyst now though would be to see some of those those new efforts being reflected in those upcoming results and then being reflected again in uh the analyst sentiment. we get some upgrades, some price target increases that could really catalyze this market into action and get a really strong rebound into play. >> A couple of specific company questions for this one too when you make a pivot like this as a company going from the traditional model of marketing to this new AI model. What's the risk with a big pivot like this? And what's the opportunity there too? >> The risk is just, you know, not being successful. Execution is a big deal, especially when you're implementing new technologies. But, uh, the potential is huge. uh we've seen AI uh boost results across industries and verticals. Um especially for companies that are really data dependent and have uh highly automatable businesses which uh digital marketing uh can be. It's totally data dependent and as far as the clicking and the funnels that drive the sales those are all completely automated. >> Yeah, automation is such a a key part of every industry and the companies that can pivot and make those moves well can really still be successful. One other question on this one and that's talking about the software angle a little bit. Any concerns about the the whole software debate and story about AI advancements really making these kinds of AI tools or AI software not as necessary? >> That risk is is always present. Uh but as I've been saying in other videos, the chance of AI disrupting these established companies is pretty small. Uh for this company and the companies on this list, it's a greater risk because they're so small and they also face pretty intense competition. But I would say for them it's not so much that an AI model will disrupt them. It's just uh the fact that there is so much competition and they are so small they could easily be out competed by a larger company or just gobbled up as part of a growth strategy. >> Yeah, that's always a risk with these micro cap names. It's also risky to think about adding any of these to my purchase buyers watch list because they can easily go one way or another. But I do like to add one stock per video that we talk about to my paper trading watch list on marketbeat.com. If you haven't checked it out yet, you can scan the QR code or just go to marketbeat.com/bid and take a look at how the stocks we talk about this channel have done over time. It's not all of the stocks. We talk about tons of them from many different varieties and perspectives, but this is one way to look at a few of the names uh that we talk about. And so for this video, I want to add this stock to the list simply because it has some strong analyst coverage. It has some strong outlook there and it's at a pretty low entry point right now. So, I hoping that upside potential is still there. What are your thoughts about adding this one, Thomas? >> Um, it seems like uh the market's buying the stock right now. A as the stock price retreated end of last year, first part of this year, um, trading volume has really become elevated. We recently hit a bottom of a spike in trading volume and at the same time, institutional coverage is really, really strong. They own 96% of the stock and they've been buying it pretty aggressively. >> All right, that's a great sign for this one. Let's get on to the third and final name that you have for us of these micro cap companies under $5 right now. All in the tech and AI space where the insiders are buying. What insiders are buying this last company? >> The last company is CS Disco. This is a small legal focused AI platform, cloud-based. They're helping with AI assisted discovery and the automation of a lot of the legal paperwork. They do have revenue. Uh they're growing. Uh they should be accelerating because they've been scaling the business. They're on track for profits. The forecast is 2028. That may be a cautious estimate given the recent signs of acceleration. Uh and insiders are buying. So, uh insiders buying this stock include the CEO, several directors, and some other um seauite executives. They own 16% of the stock and they're showing pretty solid support base right now. >> Yeah, this stock is kind of like the others that we've talked about on this list today. At least when you look at the chart, it's in a downtrend. It's down almost 50% year to date. Is that a trigger for insiders to start buying? Does that tell you something that when the stock is in a downtrend and the price pulls back and insiders start buying? What does that signal to you? >> Well, it tells you that they think that it's a value insider buying uh this year is affirming a technical bottom. Uh the market hit a bottom last year, rebounded pretty strongly, has since retreated back to retest that level and has been confirming that level as support. insider buying does look like a pretty solid signal right now and I would say based on the institutional activity that they're also buying. You can see in the chart that there's a pretty elevated spike in in trading volume. Uh at the same time, institutions own 58% of the stock and they've been aggressively buying. So assuming that the company continues to execute strategy, we can assume that the 350 level is a pretty solid support zone and anytime the price action would were to pull back to there would trigger a robust market response. Yeah, I think I agree with your consensus that the first stock we talked about on this list is the weakest of the three because these last two and especially this last one here to see this much institutional ownership and this much activity happening again on an absolutely itty bitty company when it comes to their their market cap. It's pretty impressive to see that there's that much interest in this name. What about their industry in particular and what they offer as a product makes this one so interesting? Why do you think that institutions are interested in this name? Well, it's the capacity for automation in an industry that has no automation now that I'm aware of can easily uh gain lots of market share and drive growth long term. And it's the capacity for profits that to me is just says it all. The company can can make money and with the institutions buying it the way they are, they believe that as well. And that just, you know, brings up to me a point about technical analysis, which is what really I'm doing is analyzing the charts. I can assume that I don't have to know anything about a stock if I can read the charts right. And right now the charts are telling me that people are buying the stock. The data tells me the institutions are buying the stock. I know that these guys are really smart people. Spend all their day analyzing the numbers. If they're buying this company, it looks like a pretty decent opportunity. As long as you remember it's a speculation on future earnings. >> Very good advice, Thomas, about what to do for as an investor when you look at these tiny names. And also always fun to hear about three new companies that might not be on anyone's radar yet. Let us know what you think in the comments. Do you follow what insiders are doing as a signal of whether or not to buy a stock? I'd love to hear your thoughts. And if you think any of these three names have potential. Thomas, thanks for your time today. If you're looking for other small cap names, be sure to check out this video I recently did with our analyst Chris Marotch,