Federal politicians have access to non-public, material information and/or are able to engage the services of top-tier equity fund managers. While federal law is supposed to restrict the trades of congressmen, it is rarely enforced. Conflicts of interest, effectively, do not apply.
Using Stock Act disclosures, we can emulate a portfolio with the goal of outperforming a buy-and-hold benchmark such as SPY.
Methodology
Many politicians hold big tech firms long (MSFT, AAPL, NVDA) and it is assumed you do as well. Selections emphasize undervalued stocks in underweight sectors like energy, commodities, and consumer discretionaries.
Selections are based on larger buys (>15k), options, and potential for insider information. Committee membership is a factor, but not necessarily determinative. Geopolitical events may yield clues about the market’s direction (I note Kelly Loeffler’s massive stock dump following a January 2020 nonpublic COVID briefing)
Emphasis on outperformers, those with money managers, and great timing: Ro Khanna (money manager); McCaul (great bets); Josh Gottenheimer (Investor subcommittee; money manager); Tommy Tuberville (Agriculture subcommittee; degenerate gambler); Mark Green (Energy stock degenerate); Dan Goldman (called NVDA early); Jared Moskovitz (outperformer); Kathy Manning (outperformer); Dan Crenshaw (accurate long term bets); Lois Frankel (Energy Subcommittee, outperformer); Jackie Speier (called October 2022 bottoms); Alan Lowenthal (Outperformed Nancy Pelosi); Kathy Castor (outperformed Nancy Pelosi)
Senate disclosures can be accessed here (by selecting the Financial disclosure tab, then search the database link). House disclosures are slightly more complicated, but there’s a workaround. Select the year, download, and open the text file. The DocIDs beginning with a “2” represent trades: to access Mark Green’s 20023220 6/30 report, input as a pdf using the following: “https://disclosures-clerk.house.gov/public_disc/ptr-pdfs/2023/20023220.pdf”
Risks & Shortcomings
Transaction reporting is often delayed by 45 days (or more). Market headwinds can take any play another direction.
The majority of trades are small positions part of a larger long-term portfolio and do not reflect anticipated movements in the underlying.
Sometimes they take a large position in a field they should know a lot about and it underperforms (e.g. Lois Frankel’s $45k January purchase of Dominion Energy (D) @$60/share. Frankel sits on the Energy subcommittee, yet the stock is at $52.64)
Plays may take 6-18 months to play out
The Current Portfolio
*SCHW, NGL, CLF, NFG, IFF
Your Role
I welcome everyone’s input. Ultimately, you must decide your own level of exposure and risk. Think about your target exits and what works for your strategy: 10% over SPY, 20% generally, dividend income, or more?
The game is in identifying undervalued or oversold assets. Remember, shorting is not a long-term strategy. Institutional investors use puts for insurance, not speculation.
$SCHW had its best day since 2009 following earnings and continues to outperform
Cut NFG from the portfolio for a slight gain (factoring in the dividend). I’m weary of cutting winners to feed losers, when the market tends to reward the opposite. There’s already some NatGas exposure in NGL
CLF’s earnings is 7/24; IFF reports on 8/7; NGL’s on 8/9
Scalped CVS overnight successfully. Target was 10% and it moved about 14-15%. I expected to hold longer following a pullback but it appears the whales’ interest did not abate and it actually ended up higher on the day. I took the W and closed it out.
NGL and CLF are performing poorly. I’m disappointed and may cut if they don’t shape up after earnings
Eyeing an entry on ABBV following Michael Burgess $15-50k buy at $137.25 on July 6th. He’s an M.D. on the Health Subcommittee. Stock is up 3.4% today to 142. There may be room to run but I was surprised by the performance quite frankly.
Exited ABBV Nov call for a small profit (2%). Its essentially tracking XLV (Health sector ETF) at this point. Not confident in the play and am expecting a pullback
Today was one of the rare days with beautiful timing. ABBV pulled back as expected. CVS leveled out and may have formed a local top. IFF and NGL pumped nicely with impending earnings, and profit was taken on CLF. CLF’s earnings report was more of a “look how bad we aren’t” rather than a home-run. It hit $18 today and while it can keep running, I’m not seeing the gain versus SPY that we’d ideally like to.
ABBV popped over $150 (wow!) following earnings. Entered share position on ANET following McCaul and Goldman purchases. I note Ro Khanna’s manager sold, so the confidence on this is lower. $148-150 could be a better entry. Earnings are 7/31, but this is typically the kind of dump we see before a jump in the stock
ANET basing. This is a gamble (45% confidence) through earnings today and likely not worth it. I will hold the shares, but profit, if any, should be taken on any options due to weakness in the cloud sector
Sold my ANET shares at $169 (!). Did not expect that. Its clear my OCD-risk aversion is causing me to leave money on the table. I will re-evaluate how to play these
Added a second CVS January 75c for earnings (average is $5.08). I don’t like this play nor the odds, but I am inversing myself since my instincts were wrong on SCHW, ANET, and ABBV. It seems to display the same pattern: oversold stock dumping prior to earnings pump. Caution is warranted
CVS beat on earnings and revenue and ran to $75.5 in premarket, only to dump as soon as management slashed forward guidance. This is precisely the kind of eventuality I sought to avoid. I will hold, but it appears this may be the portfolio’s first “L”. Time will tell.
I spoke too soon. Exited for 6.7%, and it kept running. An example of whenever someone is selling, another is buying. Added to the “W” column and I need a break:
Added QCOM calls for earnings tonight following Ro Khanna, Manning, and Tuberville buys. I like it under $130 and it seems to fit the target profile, though the run up in the last few weeks was concerning. Confidence: 55% so maybe that break comes after this one.
I have not because in my estimate, Carper is not an outperformer. These PSQ trades were small (1-15k range) and part of a larger portfolio in his wife’s account, much of which is in t-bills. Its overly conservative and more focused on capital preservation.
That being said, perhaps cash is not a bad option right now. As QCOM shows, even the pros can be very wrong about a particular stock. Headwinds and seasonality can nuke a position very quickly.
QCOM position was tsar-bombed despite an EPS beat. While aggregate expectations are difficult to evaluate, its obvious in hindsight this was pumped. But I still believe 140 was in the realm of possibility based on the facts. Adjustments & postmortem:
This was a multi-manager bet based target outperformers (Manning, Ro Khanna, Tuberville buys). Statistically, they have about a 75-80% win rate, depending on the entry.
Increase discrimination: take smaller positions on late entries if the stock has already risen 10-20%
I note even late buys sometimes still run. Take a look at the below between the buy and the reporting period. (Carper as well @25 ) There was money to be made even in a late entry:
IFF took a nosedive. Likely the port’s second “L”. Holding through the next dividend ex-date as it does not make sense how the stock can drop 22% on an 11% guidance drop. Management talked down their own business on the call; quite beta.
LLY up over $500 following earnings; watching DUK energy below $90
I’ll be scrutinizing the lower vol trades (1-15k) and find plays truly corrupt like the BAH (Booz Allen Hamilton) trade. This is the company Ed Snowden worked for. Earnings were solid and I wrote it off, which was a mistake.
Sen Tuberville bought HUMA in three blocks of 1-15k at an average price of $2.87. Today the stock is at $4.59. Humacyte’s tech treats ukrainian trauma injuries. Unfortunately due to reporting to delays there was no way to capitalize on this.
Update to the project: some rebalancing, shifting to tbills, and hedging. For the most part, target politicians are holding. A few items I noticed but I wouldn’t take large positions on:
Ro Khanna’s manager has a lot of confidence in Zimmer Biomet Holdings, ZBH, a medical device company. They do knee replacement surgery tech, etc. His recent 40-page disclosure has several positions in his kid’s accounts. Its too large to upload so you’ll have to pull it from the House website above.
Sen Tuberville loading up on TXN, Texas Instruments, but he recently sold his April 180 calls. Possibly they are in contention for Chips Act funding if Intel doesn’t make the cut?
