Analyzing US Senator’s Stock Picks
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There’s been a number of stories about sketchy stock trades made by US senators. The underlying implication is that Senators are privy to insider information and their trades are likely exploiting that knowledge for financial gain.
I got my data from Senate Stock Watcher. I downloaded all available reports, flattened them and pulled the performance from Financial Modeling Prep api. You can see all the data and my calculations in google sheets.
I’ve had fun with Congressmen before, when I compared their pictures to a database of mugshots. But in general I am unconvinced by some of the more salacious claims of insider trading made in the media. For one, the amounts usually thrown around are not a lot, and the average Senator is relatively wealthy. The median net worth of a US Senator is over $1 million.
+---------+---------+-------------+-------------+
| Low | High | # of trades | % of trades |
+---------+---------+-------------+-------------+
| 1,001 | 15,000 | 284 | 66% |
| 15,001 | 50,000 | 93 | 22% |
| 50,001 | 100,000 | 25 | 6% |
| 100,001 | 250,000 | 24 | 6% |
| 250,001 | 500,000 | 3 | 1% |
| | | 429 | 100% |
+---------+---------+-------------+-------------+The trade sizes seem pretty small. 66% of them were between $1,000 and $15,000, and 88% were less than $50,000. Only 3 trades were between $250,000 and $500,000. If I were senator, I wouldn’t bother drawing scrutiny by trading such small amounts in hopes of some marginal gains.
Analyzing Performance
Analyzing performance is tricky. You can easily enter into a garden of forking paths as you make decisions. For instance, you can speculate as to the execution price (open, close, weighted average, slippage). Also, the exact dollar volume isn’t even provided so you have a range. And then you have to determine relative performance. But relative to what? SP500? Maybe, but that may not be the proper benchmark. Maybe you want to consider performance relative to asset allocations of another millionaire, or maybe another 70 year old, or maybe something else entirely.
Note that all trades are from 2019–12–03 to 2019–03–31.
Let’s start with their directions of their trades:
+----------------+-------------+
| Row Labels | # of trades |
+----------------+-------------+
| Purchase | 201 |
| Sale (Partial) | 163 |
| Sale (Full) | 68 |
| Exchange | 3 |
| Grand Total | 435 |
+----------------+-------------+More sales than purchases, which probably makes sense considering there were considerable outflows of the market between these dates (as evidenced by the drop in price).
Here are the most active stocks traded.
+--------+------------+------------------+----+------------+
| Ticker | Name | Sector | # | Sum high |
+--------+------------+------------------+----+------------+
| NFLX | Netflix | Entertainment | 8 | 1,050,000 |
| DFS | Discover | Credit Card | 3 | 1,015,000 |
| REZI | Resideo | Security | 7 | 815,000 |
| DD | DuPont | Chemical | 15 | 615,000 |
| XOM | Exxon | Oil | 3 | 530,000 |
| CDLX | Cardlytics | Internet | 3 | 500,000 |
| KEYS | Keysight | Scientific | 2 | 500,000 |
| KR | The Kroger | Grocery | 20 | 405,000 |
| AZO | AutoZone | Specialty Retail | 7 | 350,000 |
| NVDA | NVDIA | Semiconductors | 6 | 350,000 |
+--------+------------+------------------+----+------------+Admittedly some stock I’ve never heard of, but no theme or pattern sticks out. Kind of all over the place.
Let’s look at just one trade. Here’s a trade from David Perdue, the great Senator of Georgia. He actually made nearly half the trades of our dataset, and it makes sense since he’s worth $15.8 million
+--------------------------+--------------------------+
| office | Perdue, David (Senator) |
+--------------------------+--------------------------+
| ticker | URBN |
+--------------------------+--------------------------+
| received | 2020-01-10 |
+--------------------------+--------------------------+
| date | 2019-12-03 |
+--------------------------+--------------------------+
| amount/low | 1001 |
+--------------------------+--------------------------+
| amount/high | 15000 |
+--------------------------+--------------------------+
| type | Purchase |
+--------------------------+--------------------------+
| start | 24.31 |
+--------------------------+--------------------------+
| end | 18.66 |
+--------------------------+--------------------------+
| percent change | -23.24% |
+--------------------------+--------------------------+
| trade percent change | -23.24% |
+--------------------------+--------------------------+
| trade amount change low | -233 |
+--------------------------+--------------------------+
| trade amount change high | -3,486 |
+--------------------------+--------------------------+So he purchased between $1,000 and $15,000 worth of Urban Outfitters. He got a pretty bad deal on this trade since it’s down 23% since he bought it. So if you look at just that trade by itself, the total loss is somewhere between $233 to $3,486 compared to not owning it. He apparently likes Urban Outfitters since he bought between $20,000 and $300,000 worth of that stock between 12/3/19 and 3/5/20.
Let’s take a look at a big one:
+--------------------------+---------------------------+
| office | Loeffler, Kelly (Senator) |
+--------------------------+---------------------------+
| ticker | DFS |
+--------------------------+---------------------------+
| received | 2020-03-12 |
+--------------------------+---------------------------+
| date | 2020-01-21 |
+--------------------------+---------------------------+
| amount/low | 250001 |
+--------------------------+---------------------------+
| amount/high | 500000 |
+--------------------------+---------------------------+
| type | Purchase |
+--------------------------+---------------------------+
| start | 83.68 |
+--------------------------+---------------------------+
| end | 39.21 |
+--------------------------+---------------------------+
| percent change | -53.14% |
+--------------------------+---------------------------+
| trade percent change | -53.14% |
+--------------------------+---------------------------+
| trade amount change low | -132,858 |
+--------------------------+---------------------------+
| trade amount change high | -265,715 |
+--------------------------+---------------------------+Here’s Kelly Loeffler, Senator from Georgia. I don’t know how she got to be worth $80 million with trades like these. She actually made two identical trades on the same day. Discover dropped over 50% since she purchased it on 1/21/20. But come on, who am I kidding? Here’s the trade she’s famous for:
+--------------------------+---------------------------+
| office | Loeffler, Kelly (Senator) |
+--------------------------+---------------------------+
| ticker | CTXS |
+--------------------------+---------------------------+
| received | 2020-03-12 |
+--------------------------+---------------------------+
| date | 2020-02-14 |
+--------------------------+---------------------------+
| amount/low | 100,001 |
+--------------------------+---------------------------+
| amount/high | 250,000 |
+--------------------------+---------------------------+
| type | Purchase |
+--------------------------+---------------------------+
| start | 122.03 |
+--------------------------+---------------------------+
| end | 139.4 |
+--------------------------+---------------------------+
| percent change | 14.23% |
+--------------------------+---------------------------+
| trade percent change | 14.23% |
+--------------------------+---------------------------+
| trade amount change low | 14,234 |
+--------------------------+---------------------------+
| trade amount change high | 35,586 |
+--------------------------+---------------------------+She bought between $100,000 and $250,000 worth of Citrix on 2/14, perhaps as a Valentine’s day gift. A 14% return in about a month and a half is pretty good. The between $14,000 —$ 35,000 could perhaps cover the cost of summer camp for one of her children. She also knows how to keep a secret because no other Senator bought Citrix during this period.
Loeffler made 106 trades between 12/3 and 3/31, totaling between $2.3 and $5.82 million. How can we look at results more holistically? One thing we can do is look at the types of trade she did and how profitable they were:
+----------------+-------------------+--------------------+
| Row Labels | Sum of payoff low | Sum of payoff high |
+----------------+-------------------+--------------------+
| Purchase | -284,039 | -573,510 |
+----------------+-------------------+--------------------+
| Sale (Full) | 218,223 | 517,157 |
+----------------+-------------------+--------------------+
| Sale (Partial) | 270,335 | 739,757 |
+----------------+-------------------+--------------------+
| Grand Total | 204,519 | 683,404 |
+----------------+-------------------+--------------------+So in a grand total, she’s up between $200,000 and $680,000 on her activity over the last few months. This is compared to her doing nothing at all. And the strong relative performance makes sense since she sold a lot more than she bought, and generally, if you sell while the market is going through a nose-dive, you’ll do better than if you buy. But also remember she’s worth $80 million and her equity investments are likely much greater than the net amount she sold.
The same is true if you look at all Senators. If they bought during this period, they likely lost money. If they sold, they likely saved money as stocks cratered. This is the aggregate payoffs:
+----------------+-------------------+--------------------+
| Row Labels | Sum of payoff low | Sum of payoff high |
+----------------+-------------------+--------------------+
| Purchase | -288,921 | -704,489 |
+----------------+-------------------+--------------------+
| Sale (Full) | 288,082 | 721,767 |
+----------------+-------------------+--------------------+
| Sale (Partial) | 358,297 | 1,194,259 |
+----------------+-------------------+--------------------+
| Grand Total | 357,458 | 1,211,536 |
+----------------+-------------------+--------------------+Your Analysis Sucks
Yeah, I know my analysis sucks. Maybe I should have looked at portfolios of individual Senators and indexed it by their net worth. Or maybe cross reference the Senator’s trades with the sub-committee they sit on. Or maybe I should have benchmarked performance relative to the stock sectors, or ignored smaller trades, or a million other things. You can do that but my guess is that you’ll get the results you’re looking for, be it Senators ruthless insider traders or they’re monkeys throwing darts.
After spending some time playing around with this data, my conclusion is that Senators are just your typical wealthy investors. I’ve been around enough people that are brilliant in one domain but clueless in other fields to believe that Senators aren’t particularly adept stock pickers. Most are lawyers. My guess is that most are wealthy because you kind of have to be to invest in running and having a network to get elected. And preferential real estate deals are likely a better avenue for growing wealth as opposed to picking stocks. Picking stocks is hard, even with insider information!
NOTE: I’ve moving this blog over to substack. Subscribe there for new posts or to read others
