It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in Cree, Inc. (NASDAQ:CREE).
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.
Cree Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Director Duy-Loan Le for US$129k worth of shares, at about US$64.46 per share. That means that an insider was happy to buy shares at above the current price of US$45.02. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Duy-Loan Le was the only individual insider to buy shares in the last twelve months.
Duy-Loan Le purchased 6000 shares over the year. The average price per share was US$56.80. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Cree is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does Cree Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Cree insiders own about US$23m worth of shares. That equates to 0.5% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About Cree Insiders?
It is good to see the recent insider purchase. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. Insiders likely see value in Cree shares, given these transactions (along with notable insider ownership of the company). If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course Cree 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, but not derivative transactions.
If you spot an error that warrants correction, please contact the editor at [email protected]. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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