The STOCK Act of 2012 was supposed to halt insider trading by members of Congress, but let’s be honest. The STOCK Act can’t really stop Congresspeople from trading on insider knowledge; they’re in a position to get it, which will influence investment decisions. What the act did accomplish was shining the light on what members of Congress are buying and selling, which can be a treasure trove of information for investors. Today, we’re looking at the three stocks most bought by Members of Congress in February and whether they might be a good investment for their constituencies.
Nancy Pelosi Buys Palo Alto Networks
Representative Nancy Pelosi (D-CA) bought Palo Alto Networks (NASDAQ: PANW) in February not once but twice, which is a telling indicator. The first purchase was before the Q4 release, the 2nd after, so she and her investment advisors viewed the post-release plunge as a buying opportunity and time to leverage the position. Her first purchase, reported in a range of $500K to $1 million, lost 27% after the release, so it took courage to double down on the position.
The good news for her and her constituency is that PANW shares are rebounding solidly. The 27% stock price implosion was a knee-jerk reaction to a strategic decision that will drive long-term value for shareholders. Palo Alto Networks will offer free or reduced services to attract new clients. The takeaway from the report is that the business is solid, growth is still in the double-digit range, and the cash flow and balance sheet are strong enough to weather the brief interruption. Analysts have forecasted that the impact on this tech stock will last twelve to eighteen months.
Palo Alto’s market was right-sized by the strategy shift. The news sparked a round of analysts' downgrades that aided the stock price implosion, but some analysts raised targets and the rebound has the market aligned with consensus. Investors should expect volatility, but Palo Alto Networks' stock price will recover. Recovery could gain momentum later this year if the shift bears fruit.
Victoria Spartz Buys Simon Property Group
Representative Victoria Spartz (R-IN) bought Simon Property Group (NYSE: SPG) twice in February, extending a trend she began last year. Ms. Spartz has only bought SPG shares since the middle of 2021 and has built a solid position. Among the reasons she may have focused on this company is its position as a REIT and the 5% dividend yield; the stock performance was tepid in the same period; however, it has been gaining traction.
Among the attractions of SPG stock is its value. It is viewed as cheap among REITs and produces solid cash flows. The company recently announced a new $2 billion stock buyback program because of it, worth about 4% of the market cap, and the dividend is worth another 5%. Recent results include accelerating top-line growth and bottom-line strength. Eight analysts rate SPG a consensus Moderate Buy and support the market with upward price target revisions.
Kevin Hearn Buys JPMorgan Chase
Kevin Hearn bought JPMorgan Chase (NYSE: JPM) a single time in the last 30 days, but don’t read too much into that. Mr. Hearn bought three other stocks the same day and has a history of active buying. His stats include an average of 100 trades per year on 121 companies, and he is mostly buying. His most recent sales are Vuzix (NASDAQ: VUZI) and Exact Sciences (NASDAQ: EXAS). Vuzix is an augmented reality play heading for penny-stock territory; Exact Sciences is a cancer screening and diagnostics company also in decline. Both stocks are rated Moderate Buy by the analysts and have significant upside potential.
JPMorgan stock is heading higher after a solid earnings report revealing NII is still flowing strongly. Because the FOMC isn’t expected to cut rates soon, NII should continue positively impacting results through mid-year. Analysts rate it a Moderate Buy, leading the market higher with revisions.
