According to the alternative data platform Quiver Quantitative, replicating Nancy Pelosi's stock trades would have yielded returns exceeding 720% since May 2014. Despite these impressive returns, the former House Speaker continues to face criticism for alleged insider trading and the potential introduction of new trade ban rules for Congress members.
Many have speculated that the California representative and other members of Congress benefit from insider information about laws likely to impact stock prices. For instance, the 2022 CHIPS Act, which offered subsidies for the semiconductor industry, has been a point of contention. Pelosi and her husband, Paul, sold 25,000 Nvidia shares at a loss when Congress approved the Act but later purchased Nvidia call options in significant quantities, as reported by Unusual Whales.
In November 2023, Pelosi acquired 50 Nvidia call options with a strike price of $120 and an expiration date of December 2024, well before Nvidia's 10-for-1 stock split. "That was definitely one that caught a lot of people's attention," noted Quiver Quantitative CEO James Kardatzke in an interview with Business Insider.
Recent Stock Trades
Earlier this month, Pelosi disclosed purchasing 10,000 Nvidia shares on June 26, according to a periodic transaction report. Just days prior, on June 24, she bought 20 Broadcom call options with a strike price of $800 and a June 2025 expiry. Interestingly, she also sold 2,500 shares of Tesla, despite the stock's strong recovery, nearly erasing all year-to-date losses.
Tesla has faced stiff competition due to the increasing popularity of hybrid vehicles, impacting its demand trajectory. Nevertheless, the company recently reported nearly 444,000 vehicle deliveries for Q2, surpassing analyst estimates by 8,000. Tesla also deployed a record 9.4 GWh of energy storage products. Despite this, the stock remains volatile, jumping over 35% in one month as investors await the company's Q2 earnings report later this month. PIMCO founder Bill Gross commented on X, "Tesla is acting like a meme stock—sagging fundamentals, straight-up price action."
Broadcom's Stock Split and Strategic Moves
Pelosi's decision to buy Broadcom options came just before the company's recently completed 10-for-1 stock split, reducing its price from $1,700 to $170 and offering investors nine new shares for each share held. Broadcom, a leading AI player, recently acquired VMware and continues to experience high demand for networking chips in AI data centres. For the quarter ending February 4, Broadcom's revenue increased 34% year-over-year to $12 billion. The chipmaker also announced collaborations with Google's TPU v7 AI chip programme and Meta Platforms' third-gen AI chip.
JPMorgan analyst Harlan Sur believes the Google TPU programme could generate over $8 billion in revenues for Broadcom this year. Meanwhile, the company maintained its $50 billion FY24 consolidated revenue guidance.
Congressional Stock Purchases
For Nvidia investors, it might be reassuring to know that Nancy Pelosi is not the only member of Congress buying Nvidia shares. Representatives Morgan McGarvey of Kentucky and Stephen Lynch of Massachusetts have also added shares of the AI chipmaker to their portfolios.
Pelosi's trades attract significant attention, but she is one of many Congress members with a portfolio generating substantial returns. Republican Representative Dan Meuser of Pennsylvania has Nvidia as one of his top portfolio holdings, returning 512.8% since August 2019 and over 103% in one year. Similarly, Democratic Senator Sheldon Whitehouse of Rhode Island has invested significantly in the "magnificent seven" stocks: Nvidia, Apple, Amazon, Microsoft, and Alphabet. His portfolio has returned over 492% since February 2014 and over 50% in one year.
Trading Strategies and Caution
Many popular online trackers monitor the trades of US government officials based on the philosophy of "if you can't beat them, join them." Kardatzke has developed investing strategies to mirror the stock trades of Pelosi and other Congress members with portfolios generating triple-digit returns. The Quiver Quantitative platform scours the internet for the latest data on congressional trades, excluding financial derivatives like options in its investing strategies. Given that the STOCK Act of 2012 requires Congress members to report trading activities within 45 days of execution, the trade completion date isn't known until much later.
Quiver Quantitative addresses this reporting lag by publishing backtested strategies "based on the disclosure date for the trades, so when they actually become public information, not necessarily when the trade first occurred," according to Kardatzke.
However, he advises against mindlessly following Congress members' trades. Kardatzke urges investors to "take a thoughtful approach to how you're acting on that information, given that it tends to be very noisy data."
Hiring a financial adviser who adheres to fiduciary standards aligning with your long-term personal finance goals can help reduce risk exposure, especially if your portfolio tracks high-growth stocks with elevated valuations.
Pelosi's portfolio has consistently outperformed the market, with last year's growth reaching nearly 65%. Her impressive returns have led to scrutiny and allegations of insider trading, but they also highlight the complexities and potential benefits of closely monitoring congressional trades. As new regulations and trade ban rules loom, transparency and ethics in stock trading among Congress members remain a critical topic of discussion.
Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.
