U.S. Senators' Stock Picks Outperform the Pros'
OCTOBER 26, 2004
By JANE J. KIM | Staff Reporter of THE WALL STREET JOURNAL
Politicians may have done a poor job improving the government's bottom line, but they seem to be doing quite well with their own.
A study suggests that U.S. senators possess stock-picking skills that even the most seasoned money manager would envy. During the boom years of the 1990s, senators' stock picks beat the market by 12 percentage points a year on average, according to the study. Corporate insiders, meanwhile, beat the market by about six percentage points a year, while U.S. households underperformed the market by 1.4 percentage points a year on average, according to separate studies. The final details of the study will be published in the December issue of the Journal of Financial and Quantitative Analysis.
The study's authors, relying on financial-disclosure forms from 1993 to 1998, looked at about 6,000 common-stock transactions of about a third of the senators each year. The researchers then mimicked the senators' transactions, buying the stocks the senators bought and selling the shares they sold. Over a six-year period, that "superportfolio" essentially beat the market by about one percentage point a month, or 12 percentage points a year.
Looking at the timing of cumulative returns, the senators also appeared to know exactly when to buy or sell their holdings. Senators would buy stocks just before the shares suddenly would outperform the market by more than 25%. Conversely, senators would sell stocks that had been beating the market by about 25% for the past year just when the shares would fall back in line with the market's performance.
The researchers say senators' uncanny ability to know when to buy or sell their shares seems to stem from having access to information that other investors wouldn't have. "I don't think you need much of an imagination to realize that they're in the know," says Alan Ziobrowski, a business professor at Georgia State University in Atlanta and one of the four authors of the study.
Senators, for example, are likely to know which tax legislation is apt to pass and which companies might benefit. Or a senator who sits on a certain committee might find out that a particular company soon will be awarded a government contract or that a certain drug might get regulatory approval, says Prof. Ziobrowski.
The Code of Ethics for Government Service states that government employees cannot use any confidential information acquired in the performance of governmental duties as a means for making profit. The U.S. Senate Ethics Manual lays out other rules barring any actions that would create a conflict of interest. But the manual also notes that if a senator happens to personally benefit from legislation that has a broad, general impact on his or her state or the nation, that gain is assumed to be "incidentally related." By law, senators are required to disclose their common-stock transactions and other personal financial interests by May 15 of each year. Those public documents can be found online atwww.opensecrets.org, a Web site run by the Center for Responsive Politics, a nonprofit research group in Washington.
Not all of the senators actively are buying and selling stock. Just over a third of the senators bought or sold individual stocks in any one year in the study, and the vast majority of stock transactions were less than $15,000. But a small group of senators appeared to be quite active in the stock market. In fact, a handful of senators -- Clairborne Pell (D., R.I.), John Warner (R., Va.), John Danforth (R., Mo.) and Barbara Boxer (D., Calif.) -- accounted for nearly half of the stock trades analyzed. (Only Sens. Boxer and Warner are still in the Senate. A spokeswoman for Sen. Boxer says her assets are now in a blind trust, and a spokesman for Sen. Warner declined to comment.) To eliminate the possibility that the heavy trades of a few senators may have skewed the results, the authors also looked at each senator's trades as individual transactions and found that both big traders and small ones shared similar outsized returns.
Since congressional disclosure forms use broad ranges to report investment income and losses, the amount of money earned or lost by a senator from stocks could not be determined, the study noted.
Write to Jane J. Kim atjane.kim@dowjones.com
3 comments:
Nov 4, 2006
According to CRP's list, the most popular stock in Congress in 2005 (the most recent year data are available) was General Electric, which was owned by 103 Senators and House members. Rounding out the top five were Pfizer, Cisco Systems, Microsoft, and Intel—all household names and all stocks owned by countless mutual funds and large numbers of individual investors. "If you looked at any random group of investors in the country, this is probably what their portfolio would look like," says Jim Angel, an associate professor of finance at Georgetown University.
The data really start to get interesting when you compare stocks and party affiliation. For example, while 46 Republicans owned ExxonMobil in 2005, only 18 Democrats owned the stock. Republicans also preferred drug company Amgen, Altria, British Petroleum, and Coca-Cola in disproportionate numbers. As for Democrats, their preferred stocks include Texas Instruments, Vodafone, and drugstore chain Walgreens. A few stocks, such as media giant Time Warner and Seattle-based bank Washington Mutual, were split pretty evenly between the two parties. (Donut chain Krispy Kreme didn't make it onto the list of the top 50 stocks, but disgraced former Rep. Mark Foley had a sweet spot for the stock.)
SOURCE: http://www.stockandoption.com/5994_stock_holdings_by_our_congressmen.shtml
June 13 (Bloomberg)2009 -- U.S. senators including Republicans Jon Kyl of Arizona and Orrin Hatch of Utah suffered losses in their personal portfolios as the federal government moved to bailout the floundering financial industry last year.
Hatch reported holding from $50,000 to $100,000 worth of Charlotte, North Carolina-based Wachovia Corp. stock in 2007. By the time the bank was taken over by San Francisco-based Wells Fargo & Co., his holdings were worth no more than $30,000, according to a 2008 financial disclosure form released yesterday.
Kyl sold 150 shares of New York-based American International Group Inc. on Oct. 17, taking a $4,144 loss. He also lost $5,019 after selling 330 shares of Freddie Mac and $3,775 after selling 200 shares of Fannie Mae. Kyl sold his shares of Washington- based Fannie and McLean, Virginia-based Freddie two weeks after the U.S. took control of the two mortgage giants.
“Like many Americans with IRAs or other retirement accounts, Senator Kyl holds a variety of investments as part of a broadly diversified portfolio independently managed by a financial adviser,” said Ryan Patmintra, a spokesman for him.
The wife of Massachusetts Democratic Senator John Kerry, Teresa Heinz Kerry, sold all of her stock in AIG, a transaction valued at between $475,000 and $1.3 million.
The last sale occurred Sept. 18, two days after the company ceded majority control to the government in exchange for an $85 billion loan. Kerry reported last year that his wife owned more than $2 million in AIG stock.
Kerry spokeswoman Whitney Smith declined to comment.
Earlier this week, the disclosure form for House Speaker Nancy Pelosi reported that the California Democrat’s husband lost as much as $1 million on AIG shares.
2/2 Faith in Buffett
The Senate’s No. 2 Democrat, Richard Durbin of Illinois, put his financial faith in Warren Buffett, buying $98,046 worth of stock in Omaha, Nebraska-based Berkshire Hathaway Inc. even as he sold more than $116,000 of other holdings.
Senator George Voinovich, an Ohio Republican, also bought into Berkshire last year, reporting a purchase worth between $1,000 and $15,000. And Senator Blanche Lincoln, an Arkansas Democrat, reported a Berkshire holding worth $15,000 to $50,000.
On their financial disclosure forms, lawmakers list the value of property or stock holdings within financial ranges instead of giving specific amounts.
Hutchison Holdings
Senator Kay Bailey Hutchison, the top Republican on the Commerce Committee, owns $152,000 to $380,000 in stock in companies with communications interests regulated by the panel, according to the Texas lawmaker’s disclosure form. Reported holdings include $50,000 to $100,000 in AT&T Inc. and $101,000 to $250,000 in General Electric Co., which owns 80 percent of the television, film and amusement park company NBC Universal.
“She is in complete compliance with every law and every Senate rule relating to financial interests,” said Lisette Mondello, a spokeswoman for Hutchison. “This year, as in every other year, she always fully discloses her interests.”
A company in which Cindy McCain, wife of Senator John McCain, has a controlling stake received $337,493 in payments from a subsidiary, King Aviation Inc., over the past two years, according to the Arizona Republican’s disclosure statements.
During the same period, McCain’s campaign paid King Aviation $507,126 for the use of aircraft in his unsuccessful 2008 presidential bid, according to the Center for Responsive Politics, which tracks campaign spending. Prior to 2007, King had not made any such payments to Cindy McCain’s Phoenix-based beer distributorship, Hensley & Co., since at least 1999.
Leah Geach, a spokeswoman for Senator McCain, did not return a phone call and two e-mails seeking comment. Doug Yonko, a spokesman for Hensley, did not return a call.
Unusual Income
The filings offered insight into unusual sources of income.
Hatch reported $8,369 in royalties from writing songs, which generally have patriotic or religious themes. Hutchison reported getting between $1,000 and $15,000 for her seat licenses for the Texas Motor Speedway in Fort Worth.
Senator Jim Bunning, a Kentucky Republican and a member of the Baseball Hall of Fame, earned $16,092 at baseball card shows and donated the funds to the Jim Bunning Foundation. He reported that the Hall of Fame flew him and his wife to the annual induction ceremony in Cooperstown, New York.
Kennedy Advance
Massachusetts Senator Ted Kennedy, the Democratic Party patriarch suffering from brain cancer, received a $2 million advance against royalties last year for his memoirs. The book, “True Compass,” will be published on Oct. 6, according to his publisher, Hachette Book Group.
Kennedy’s office referred questions about the book to Hachette, a subsidiary of French publisher Lagardere SCA. Hachette’s Web site says that Kennedy, 77, “speaks with unprecedented candor about his extraordinary life.”
The manuscript is finished, said Cary Goldstein, director of publicity and an acquiring editor at Hachette’s Twelve unit. He declined to comment on the total payment for the book other than to say that at least some proceeds will go to charity.
“It’s a work of enduring significance by a major American personality,” Goldstein said.
SOURCE: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aH.X5ng31nd0
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