We recently compiled a list of the 10 Technology Stocks with Insider Buying in 2024. In this article, we are going to take a look at where Wolfspeed, Inc. (NYSE:WOLF) stands against the other technology stocks.
Tracking insider buying activity can provide valuable insights into potential investment opportunities. Corporate insiders, such as named executive officers, directors, and other key personnel, possess a deeper understanding of their companies than the average investor. Their knowledge extends beyond quarterly earnings reports and public filings, allowing them to assess long-term growth prospects, operational trends, and industry shifts well before these factors are reflected in stock prices. When insiders buy shares of their own company, it often signals confidence in the firm’s future. Unlike institutional investors or analysts who often react to short-term market fluctuations, insiders usually have a vested interest in sustained growth, making their purchases a compelling indicator of potential upside. Furthermore, while analysts and investors valuing a business often rely on a set of assumptions, many of which are imprecise, insiders leverage confidential information extracted from their relationships and correspondence with clients and suppliers to get precise outlooks on the evolution of demand and other industry trends.
Empirical studies on the subject tend to agree that insider buying can be a reliable predictor of subsequent stock price returns, but there are some caveats. Research has shown that stocks with significant insider purchases tend to outperform the broader market in the subsequent periods, as insiders have access to material, non-public information that allows them to make more informed investment decisions than the public. Studies by academics and analysts indicate that insider purchases, particularly by top executives and directors, correlate with future price appreciation, especially when conducted in clusters or during periods of market uncertainty. This suggests that investors should not overreact to individual transactions made by an insider, as those can be motivated by purposes unrelated to the general direction of the business – for example, a newly promoted executive officer could be suddenly buying the company’s stock simply to comply with the company’s internal guidelines on insider ownership. What one should be looking for is clusters of insiders buying significant amounts worth of stock, at specific periods, such as material developments in the business or industry. Insiders are often active buyers of their own company’s stock during times of rapid decline in the stock price due to such factors as overreaction to some negative short-term developments in the business, like for example missing quarterly earnings. Insiders, with their greater visibility into the future, have a better understanding of the magnitude of risk, and can thus exploit opportunities arising from the fears of less informed investors.
Studies also show that peak buying and selling from insiders occurs at extreme points of the market – for instance, record valuations and market capitalizations tend to coincide with accelerated insider selling, while troughs in the market and peak investor fears usually coincide with insiders starting to buy. With the US stock market currently being near peak valuations, insider buying has been largely muted, especially in expensive sectors like technology. Our research suggests that all of the top 50 largest technology companies in the US exhibit negative overall insider transactions, meaning that selling dominates over buying. In this context, finding technology stocks in which insiders actively buy shares could offer unique insights and positive signals for the company’s future. In this view, we will take a look at some of the tech stocks with insider buying.
Our Methodology
We used Insider Monkey’s insider trading stock screener to find technology stocks with at least two insiders buying shares worth at least $100,000 during 2024. We believe that multiple insiders buying significant amounts of stock represents a higher chance that insiders have high confidence in the company. For all the companies we also include the number of hedge funds that own it and include in the article the top 10 names with the largest hedge fund ownership, according to Insider Monkey’s database of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A worker assembling metal oxide semiconductor field effect transistors (MOSFETs) on a conveyer belt.
Wolfspeed, Inc. (NYSE:WOLF)
Number of Hedge Fund Holders: 27
Wolfspeed, Inc. (NYSE:WOLF) is a leader in silicon carbide semiconductor technology, driving advancements in power electronics and radio frequency applications. The company’s high-efficiency chips enable next-generation solutions in electric vehicles, renewable energy, telecommunications, and industrial power systems. With the increasing demand for energy-efficient and high-performance semiconductors, WOLF is expanding its manufacturing capacity and investing in innovation to accelerate the adoption of wide-bandgap materials.
The share price of Wolfspeed, Inc. (NYSE:WOLF) experienced a major decline of more than 70% in the last twelve months, as the company was hit by a pronounced decline in the industrial and energy sectors, which in turn resulted in a headwind for profitability due to lower fab utilization rates. Despite these challenges, two insiders bought significant amounts of shares in late November 2024 as the stock price reached new lows. Two weeks later, the company announced ambitious plans during a Technology & AI conference – WOLF is undergoing a strategic transformation, simplifying its manufacturing footprint and transitioning to 200mm production to drive significant cost advantages. Wolfspeed, Inc. (NYSE:WOLF) is also focused on capitalizing on the growing electric vehicles market, with a diverse set of design-ins coming into production, while also expanding its presence in industrial and energy applications. The WOLF’s $2.5 billion CHIPS funding package and its focus on improving cash flow and capital efficiency position the company well for long-term growth and profitability. Given the ambitious targets, it is of no surprise that insiders saw an opportunity with the stock as it has been trading near all-time lows.
Overall WOLF ranks 7th on our list of the technology stocks insiders are buying in 2024. While we acknowledge the potential of WOLF as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WOLF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
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