Small Cap Insider Buys Thursday

|
 |  Includes: CYTR, CZWI, FABK, HERO, PZG, XPL
by: Gutone

Generally, small cap (market cap < $2 billion) companies are not closely followed by professional analysts. Individual investors, facing thousands of stocks, often find it difficult to come up with a short list to examine closely. Insiders, especially executives and directors of small companies tend to know their company very well.

Below is a list of notable insider purchases of small-cap stocks filed at the Securities and Exchange Commission Thursday. Following Seeking Alpha's small-cap policy, all the stocks in the table are greater than $1 per share or $100 million market cap.

Tracking insider purchases can generate lucrative returns. I have written a short analysis of each company's financial records. However, these are not buying and selling recommendations. It is also important to pay attention to how much the insiders buy, especially with respect to the size of their company and their regular income. I have filtered out those transactions with a total value of less than $10,000.

CytRx Corporation (NASDAQ:CYTR) is a biotechnology company. It has a market cap of $103.00 million. According to Thursday's SEC filing, CytRx has one insider who purchased a total of 44,824 shares at the total value of $230,344. One concern is the company isn't profitable at this point (almost no revenue), but that is relatively common among biotech companies. The company has $31.98 million cash on its balance sheet and no debt. The trading volume has been stable recently. This month, 1.25 million shares are being shorted. Comparing to 3.64 million shares shorted over the previous month, the shares short have decreased by 65%. The pricing movement and decreased short shares suggest this might be a relatively safe play.

Citizens Community Bancorp, Inc. (NASDAQ:CZWI) is a Midwest bank. It has a market cap of $29.00 million. According to Thursday's SEC filing, Citizens Community Bancorp has one insider who purchased a total of 5,500 shares at the total value of $31,075. Its price/book ratio is 0.54. Such a low price/book ratio often suggests the market is discounting the asset value of the company, making it potentially undervalued. Citizens Community Bancorp's operating margin of 6.10% is low among financial companies. Its revenue grew by 4.20% to $17.22 million, and its net income declined by 17.50% during the most recent quarter. This month, 0.11 million shares are being shorted. The short ratio of Citizens Community Bancorp is 18.70, accounting for 2.50% of floating shares. Given the generally positive financial records and the high short ratio, it is possible to observe a sizable short squeeze on this stock in the near future.

First Advantage Bancorp. (OTCQX:FABK) is a Southeast bank. It has a market cap of $53.20 million. The company pays a dividend of 1.50%. According to Thursday's SEC filing, First Advantage Bancorp has 5 insiders who purchased a total of 1,884 shares at the total value of $25,526. Multiple insider purchase occasions are usually a positive sign. The stock price was within a fairly narrow range over the past twelve months. Its P/E ratio of 23.40 is on the expensive side. Investors should use some cautious because of this valuation. Its price/book ratio is 0.79 and it had a revenue of $16.23 million. First Advantage 's operating margin of 25.14% is healthy. Both its revenue and earnings grew in double digits over the latest quarter, by 22.30% and 158.40%, respectively. This is a relatively safe play based on the bank's financial records.

Hercules Offshore, Inc. (NASDAQ:HERO) is an oil & gas drilling & exploration company. It has a market cap of $537.10 million. According to Thursday's SEC filing, Hercules Offshore has one insider who purchased a total of 50,000 shares at the total value of $154,800. Its price/book ratio is 0.54. Hercules Offshore has an enterprise value / EBITDA ratio of 11.15. The company had a net income of $-91.22 million and EBITDA of $107.80 on a revenue of $639.30 million. Its revenue dropped by 10% during the most recent quarter. It is currently not making money. The trading volume has been stable recently. This month, 14.01 million shares are being shorted. Comparing to 12.39 million shares shorted over the previous month, the shared short has increased by 13%. Given the reasonable financial records and insider purchase, this is a worthwhile candidate for your watch list.

Paramount Gold and Silver Corp. (NYSEMKT:PZG) is an industrial metals & minerals company. It has a market cap of $340.50 million. According to Thursday's SEC filing, Paramount Gold and Silver has one insider who purchased a total of 10,000 shares at the total value of $23,200. The company had no revenue and an EBITDA of $-15.81 million. The company has $16.14 million cash on its balance sheet. This month, 18.50 million shares are being shorted. Comparing to 16.74 million shares shorted over the previous month, the shared short has increased by 10%. The short ratio of Paramount Gold and Silver is 17.30, accounting for 16.20% of floating shares. Given the miserable financial records (negative EBITDA) and overwhelmingly negative short selling activities, any decision to invest in this stock is not backed by fundamentals.

Solitario Exploration & Royalty Corp. (NYSEMKT:XPL) is a gold company. It has a market cap of $44.20 million. According to Thursday's SEC filing, Solitario Exploration & Royalty has 2 insiders who purchased a total of 225,000 shares at the total value of $274,500. Multiple insider purchase occasions are usually a positive sign. The company had no revenue and an EBITDA of $-8.20 million. Similar to Paramount Gold and Silver, Solitario also looks ugly on financials -- unless insiders know something extraordinary is about to happen -- this is also a very risky play.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.