Given differing perspectives, there has been significant discussion regarding whether members of Congress should be permitted as they have access to information that helps them profit from stock trades, whether they are actively trading or not. Some argue politicians have demonstrated an uncanny ability to time their stock investments to maximize financial gains, prompting calls for stricter regulations and a new ban for Congress members and their immediate families.
However, academic research suggests that stocks members of Congress are buying are most likely picked at random. Only a select few demonstrate greater aptitude in the financial markets than in the legislative process.
On the other hand, ban supporters argue that politicians can use close family members, such as spouses and children, to get around scrutiny of trades. It is still possible to track the stocks members of Congress are buying and get a glimpse of their recent trading activity, whether they are actively trading or their spouses and dependents. The success of some members of Congress has even inspired brokers to propose the creation of exchange-traded funds (ETFs) based on their stock picks.
With that in mind, let us examine some of the more successful stocks members of Congress — or their spouses and dependents — are buying:
Palo Alto (PANW)
Palo Alto (NASDAQ:PANW), the California-based cybersecurity firm, saw its shares jump 9% after disclosure that former Speaker Congresswoman Nancy Pelosi purchased call options in the company. Pelosi isn’t the only major politician investing in the company, as data shows five other members of Congress from Republican and Democratic parties have also taken stakes in PAWN. However, Pelosi’s prominence and ability to achieve a 91% return on her investment over the last 12 months has generated the most attention, despite it was revealed that the calls’ owner was a spouse.
PAWN’s share price fell after reporting disappointing quarterly earnings a couple of weeks ago, and currently trades at a price-to-earnings (P/E) ratio of 46.4x. This is only slightly above the average for the broader U.S. technology sector of 44.2x. As one of the stocks that members of Congress are buying at large, it could signal confidence in Palo Alto’s long-term prospects despite recent earnings results not meeting market expectations. As the threat of cyberattacks increases, the company remains well-positioned in a growing industry.
Simon Property Group (SPG)
As the biggest owner of shopping malls in the U.S., Simon Property Group (NYSE:SPG), headquartered in Indiana, represents an opportunity as one of the stocks members of Congress are buying. Congresswoman Victoria Spartz, who is the representative for Indiana’s 5th district, recently disclosed an acquisition of between $50-100K in the company. However, she kept the owner undisclosed. The same day, her child also bought a small stake between $1-15K. The investments indicate that Spartz sees value in SPG despite the challenges the retail real estate sector is currently facing.
SPG is surprisingly affordable given its relative size, with a market capitalization of $52.130K. The company offers a solid dividend yield of 5.2% and has a P/E ratio of just 21.8x its earnings, below the almost 28x of the benchmark S&P 500 index.
Target (TGT)
According to recent disclosures, Target (NYSE:TGT) is one of the stocks that members of Congress are buying. Senator Thomas Carper’s spouse purchased shares in the retailer on 16 February, which increased in value by 12% following the release of its earnings results. The company has benefitted from consumers seeking good value items and productivity improvements from a cost reduction program announced last year. Investors were also reassured by Target’s plans to accelerate its store opening plans going forward.
Target trades at a P/E ratio of around 21.5x, representing a discount to its main rival, Walmart (NYSE:WMT), which has a P/E ratio of approximately 31.3x. This suggests Target may offer better relative value for investors at its current market price.
On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.