When it comes to steering fundamental changes on financial markets, policy influence comes from the top. Companies have a lot of leeway, but they have to conform to regulations enacted by federal elected officials. Having access to privileged information can create significant information asymmetry between policymakers and the rest of the market. Naturally, temptations to use that information for profit could arise.
In 2022, the five richest members of the House of Representatives are Rep. Darrell Issa (R-California), Rep. Greg Gianforte (R-Montana), Rep. Jared Polis (D-Colorado), Rep. Dave Trott (R-Michigan), and Rep. Michael McCaul (R-Texas).
Although she doesn’t make the top-five list of wealthiest members of Congress, Rep. Nancy (D-California) Pelosi stands out as one of the richest members of that governing body.
Who Is Nancy Pelosi?
Nancy Pelosi, a member of the Democratic Party, currently serves as Speaker of the United States House of Representatives.
Born in an Italian-American family, Pelosi has a strong background in politics. Her parents were active politicians, especially her father, a Democratic congressman — a career path she would follow, entering the Congress in 1987.
Currently, Pelosi has just started her fourth term as speaker of the House.
What Are Nancy Pelosi’s Stock Market Investments?
According to the Stop Trading on Congressional Knowledge Act of 2012, Congress members must disclose financial transactions within 45 days. Thus, Pelosi’s investments are public knowledge, as are the investments of all current members of the Congress and the Senate.
According to public trackers, during the last two years, Pelosi reported 102 transactions, primarily purchases (77%) in the technology sector (57%).
The following stocks make up the majority of Pelosi’s portfolio:
Apple Inc. (NASDAQ: AAPL)
Apple Inc. (NASDAQ: AAPL) designs, manufactures and sells smartphones, personal computers and other tech accessories, as well as various services. The company is one of the strongest brands in the technology sector and the largest company in the world by market cap ($2.9 trillion).
The stock currently trades with a high price-to-earnings (P/E) ratio of 30.28. It increased its revenues while simultaneously boosting profit margins in prior years. Critics might point out its low dividend yield but keep in mind that the company delivers outstanding returns on capital employed.
Amazon.com Inc. (NASDAQ: AMZN)
Amazon.com Inc. (NASDAQ: AMZN) is a multinational company that engages in e-commerce, cloud computing, digital content products and services and artificial intelligence. The company operates through 3 segments: North America, International and Amazon Web Services (AWS).
Amazon ranks as one of the U.S.’s most valuable companies, with a market cap of $1.6 trillion. It trades with a P/E ratio of 62.3, three times the U.S. online retail industry average (20.4). Future growth forecasts are high, but at 29%, they are actually in line with the industry.
Meta Platforms Inc. (NASDAQ: FB)
Formerly known as Facebook, Meta Platforms Inc. (NASDAQ: FB) develops products that connect people through mobile and other devices, virtual reality headsets and in-home devices. Across all the platforms, Meta reaches 2.91 billion people every month. The company’s structure has two main segments: Family of Apps (social networks) and Facebook Reality Labs (metaverse).
With a market cap of $927 billion, the stock currently trades at a reasonable P/E of 23, boosting a positive trend in both revenue and net margin growth. Furthermore, the company has a rock-solid balance sheet and virtually no debt.
NVIDIA Corp. (NASDAQ: NVDA)
NVIDIA Corp. (NASDAQ: NVDA) is a global visual computing company with a market cap of $700 billion. The company operates in two segments: Graphics and Compute & Networking. Wider audiences know NVIDIA as a premier graphics processor unit (GPU) manufacturer whose products excel in video gaming as well as cryptocurrency mining.
The stock currently trades at a steep 85.3 P/E ratio, well above the industry average (31.8). Despite optimistic forecasts and a positive margin growth trajectory over the past years, it is questionable how much is already priced in this hefty valuation.
Salesforce.com Inc. (NYSE: CRM)
Salesforce.com Inc. (NYSE: CRM) is an enterprise cloud computing solution leader that focuses on customer relationship management (CRM).
Essentially, Salesforce transitioned the CRM solutions from local hosts into the cloud. The company did this simply and affordably. This winning formula made it into one of the largest software companies in the world.
It has a $234 billion market cap, trading at an incredible 135 P/E ratio. Although in a positive trend, its margins remain relatively low for a software company at 6.96%. Analysts forecast that the company’s growth will outperform the industry in the coming years.
AllianceBernstein Holding (NYSE: AB)
AllianceBernstein Holding (NYSE: AB) is an asset management company that invests in various financial instruments on the global market. Additionally, the company provides research services to individuals and business entities through its Bernstein Research subsidiary.
Financial stocks have been less popular in recent times, which is also the case with AllianceBernstein Holding, as it has a P/E ratio of 14.3. Although the analysts aren’t optimistic about future growth, expecting that it underperforms the industry, the company has impressive profit margins and a pristine balance sheet with no debt.
Vote Your Conscience
The U.S. Securities and Exchange Commission (SEC) defines insider trading as “buying or selling a security in breach of a fiduciary duty or other relationship of trust and confidence on the basis of material, nonpublic information about the security” and includes government employees and their associates who trade based on confidential information they learn because of their employment with the government.
Current efforts in both parties seek to change the rules on elected officials being able to trade stocks during their time in office. Democratic senators Jon Ossoff and Mark Kelly have sponsored a bill to restrict stock market trading for senators and congresspeople, as has Republican senator Josh Hawley.
As late as last month, Speaker Pelosi doesn’t support the move. In answer to a question asked during her Dec. 15, 2021, press conference asking if “members of Congress and their spouses [should] be banned from trading individual stocks while serving in Congress,” Pelosi answered in the negative, saying that the U.S. “is a free market and people — we are a free market economy. They should be able to participate in that.”
In light of the formidable power the American public invests in its elected officials of both parties, all of whom know far more than the average citizen about trends in the general economy and specifics about publicly traded companies, you may want to follow the progress of these two bills and let your elected representatives know what you think.
As always, be sure to come back to Benzinga for current financial and economic news.
Frequently Asked Questions
Does Congress have an insider trading problem?
Insider trading by a member of Congress is a crime. However, it is not easy to prove that the accused engaged in illicit activity.
Despite public knowledge that senators Kelly Loeffler, James Inhofe and Dianne Feinstein made significant trades on the day of the briefing with the CDC Director regarding the COVID-19 pandemic in January 2020, the U.S. Department of Justice eventually discontinued an investigation into their actions in May 2020. An investigation into Senator Richard Burr’s insider trading on the same information closed this month with no charges filed.
Meanwhile, according to Unusual Whales — a service that tracks the large stock and unusual option flow movement — in 2021, members of Congress bought and sold $290 million worth of equities throughout the year and beat the market.
Who can trade on insider information?
Insider trading based on material, nonpublic information about a company is forbidden. Although often a subject of academic debate, insider trading creates an unfair situation because of asymmetrical information access.
This rule doesn’t mean that insiders aren’t allowed to trade any stocks. They can buy and sell stocks as long as the activity doesn’t concern material information that is not yet available to the public.
Furthermore, they have to report their trades to regulators like the SEC where the information will be publicly available.
About Stjepan Kalinic
Forex, Equity Analysis, and Financial Education