Congressional Stock Trading Is Back!
Earlier this year, I wrote a company deep dive into Roblox, the digital playground for Metaverse novices everywhere. One of the points in my bull case was that House Speaker Nancy Pelosi had purchased the company. Why is this bullish? Because Pelosi is a prolific trader.
During the COVID-19 pandemic stock market, Pelosi has grown her family fortune by nearly $17 million via stock trading, with an average annual return of 69%. For context, this crushes investing legends Warren Buffett, Charlie Munger, and even Jim Simons. Pelosi's positions have generated so much money and attention that there are now Tik Tok accounts dedicated to tracking her moves so retail investors can follow along. But how are they tracking her moves?
Thanks to 2012's "Stop Trading On Congressional Knowledge" (STOCK) Act, members of Congress must disclose all public securities transactions they participate in within 30 days. And while we have some members of Congress (like Representative Alexandra Ocasio-Cortez and Senator Jon Ossoff) that are pretty public on their stance that Congress-people should not be able to trade public securities while in office, others hope to fly under the radar with their movements.
That's where Reddit user u/pdwp90 comes in. This user ranked the five best stock trades by Congress in the last 60 days, and there are some fun ones in here. Let's go!
5. Representative Kevin Hern purchases devon Energy Corporation on December 30
Shout out to the honorable Kevin Hern of Oklahoma's first district for being a frequent trader, with this being his first of two entries on today's list. In this section, his target was Devon Energy Corporation! Hern has dipped into this pool six times in the past year, according to House Stock Watcher, with the most recent purchase coming at the very end of the year when he bought between $1,000-$15,000 (but let's be real).
The company has subsequently gained 12% year-to-date at time of writing, but has fallen from its yearly high of 22%. Not bad considering the S&P 500 this year is down 5% after suffering its worst month since March 2020.
4. Representative Josh Gottheimer sells Affirm Holdings on December 28th
I'm on record about Affirm Holdings, and I'm a big fan of the company. I think the Buy Now Pay Later revolution is here to stay, and Affirm is leading the pack. When I published my piece on the company, many agreed with me that this was a company to watch.
You know who didn't? Representative Josh Gottheimer of New Jersey's fifth district, who sold Affirm en masse on December 28th. Was he locking in profits at the end of the year? Maybe, but he's also on the House Committee on Financial Services, so it's likely he knows something in this world that we don't. Speaking of which, Gottheimer got out at the exact right time as Affirm has now dropped nearly 32% year-to-date.
3. Representative John Garamendi sells Meta Platforms on January 14
Meta Platforms (formerly known as Facebook) is a darling of the investing community. Adored by retail investors and hedge funds alike for their incredible cash flow that essentially made them a value stock at the beginning of 2021, Representative John Garamendi of California's third district didn't quite see it that way. He dumped his Meta stock on January 14, which makes this the first sell of this year on the list.
Why is this date significant? Because January 14 was the last day of Meta's stable price movements before descending into a chaotic spiral, culminating with their disastrous Q4 earnings call that saw the company dive over 23% in one day, wiping a record $200 billion off their market capitalization in one day.
2. Representative Kevin Hern purchases Pioneer Natural Resources on December 14
What a move by Hern again! This man loves his energy companies, and this time it's Pioneer Natural Resources in his sights. He's actually purchased this company six times over the past 12 months, with the largest purchase coming last October when he bought between $100,000-$250,000 of the stock just six days after purchasing between $1,000-$15,000 of the company. The man LOVES natural resources.
Anyway, it was again a masterstroke by the honorable Representative who saw his position rise 18% year-to-date, again during a so-far down year for the S&P. This man should open up a hedge fund.
1. Senator Tommy Tuberville purchases QQQ put options on December 29
Of all of the trades on this list, this one was certainly the most daring, but "no risk it no biscuit" I imagine they say on the Plains. That's right, we have former Auburn football coach-turned Senator Tommy Tuberville, who made the greatest trade this quarter by purchasing QQQ put options with a March expiration.
If you're unfamiliar, I wrote an options trading primer you can find here, but a "put option" is essentially betting against the security. As the security falls, your position makes money, and man did the S&P 500 (the index that QQQ tracks) fall in January. As mentioned earlier, the market had its worst month since March 2020, falling as much as 8% before recovering a bit to finish -5%. At its peak (trough?), Senator Tuberville's put options were worth over 400% what he paid for them, though that has come back down a bit since the recovery. What a move by the man who purchased Alibaba immediately after criticising China.
The Bottom Line
Many will read this as a specific attack on these members of Congress, which it certainly is not. This is meant really to point out the ludicrous hypocrisy of insider trading. Members of Congress are continually briefed on sensitive information that affect the day-to-day operations of the country and the companies within it, which any member of Congress could trade securities against.
The rule itself should change. It just should. But in the meantime, this could be an interesting approach to investing. I'm certainly not telling you to run out and copy every single Congressional trade, but if a member of Congress purchases a security, take notice. It could be one to add to your watch list. Or you could just look at my curated list of free stock research instead. Either one.
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