The recent price decline of 15% in Wolfspeed, Inc.'s (NYSE:WOLF) stock may have disappointed insiders who bought US$1.07m worth of shares at an average price of US$29.05 in the past 12 months. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth US$816.9k which is not ideal.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

Wolfspeed Insider Transactions Over The Last Year

The Independent Director John Replogle made the biggest insider purchase in the last 12 months. That single transaction was for US$260k worth of shares at a price of US$26.04 each. That means that an insider was happy to buy shares at above the current price of US$22.08. Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

While Wolfspeed insiders bought shares during the last year, they didn't sell. They paid about US$29.05 on average. This is nice to see since it implies that insiders might see value around current prices. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

Wolfspeed is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.

Wolfspeed Insiders Bought Stock Recently

Over the last quarter, Wolfspeed insiders have spent a meaningful amount on shares. Specifically, Independent Director Marvin Riley bought US$50k worth of shares in that time, and we didn't record any sales whatsoever. This is a positive in our book as it implies some confidence.

Does Wolfspeed Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Wolfspeed insiders own 0.7% of the company, worth about US$22m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Do The Wolfspeed Insider Transactions Indicate?

It's certainly positive to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Given that insiders also own a fair bit of Wolfspeed we think they are probably pretty confident of a bright future. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. You'd be interested to know, that we found 2 warning signs for Wolfspeed and we suggest you have a look.

Of course Wolfspeed may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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