To many people, our national lawmakers fall into the category of the "smart money" -- which includes the "well-connected money" -- and it's widely believed these folks have an edge when it comes to investing in stocks. While that's probably the case, my purpose here isn't to try to address that belief, which likely can't be proven. Rather, as a 3D printing specialist for the Fool, I thought it would be interesting to know what congresspeople have invested in this space, and to see if we can garner any valuable general investing takeaways from their moves. As it turns out, there are three solid ones we can distill from the activities of the two biggest investors in 3D printing stocks.
Before we dig in to see who on Capitol Hill has been buying and selling3D Systems , Stratasys , and ExOne , a bit about our data source:
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The Center for Responsive PoliticsThe CRP is a nonprofit, nonpartisan research group that tracks money in politics. Among other goodies, its OpenSecrets.org website reports on the finances of Congress members, based upon the annual disclosures they must submit by May 15 for the previous year. Lawmakers are also now required to report ranges for securities transactions of more than $1,000 within 30 to 45 days after the trade takes place.
The broad viewA handful of congresspeople have dabbled in the 3D printing stock space -- and interestingly, mostly in Stratasys. There's only been one who's invested in 3D Systems and ExOne -- the same one, as you'll see -- while reportedly none of our lawmakers have hopped on board the U.S.-listed but foreign-based voxeljet. However, there are only two who have invested any sums worth highlighting -- Congressman Lou Barletta (R-Pa.) and former Congressman Brad Schneider (D-Ill.), who exited office in January. (The other congresspeople who have invested in Stratasys are former Senator Kay Hagen (D-N.C.), Senator Sheldon Whitehouse (D-R.I.), and House members Lois Frankel (D-Fla.) and Buddy Carter (R-Ga.).)
3 takeaways from these two lawmakers' moves:
1. Don't fall prey to all-or-nothing thinking when it comes to selling.Investors can learn a valuable lesson from the transactions of Barletta in 3D Systems and Schneider in Stratasys. Both soldsome-- but not all -- of their holdings after the stocks had considerably run up in price. Currently, these sales are looking smart. However, we don't know at this point whether or not they'll ultimately turn out to be wise moves, as each of these stocks could surpass its former all-time high in the future.
To be clear: I'm not advocating short-term trading, as that's almost always a loser's game. I'm just encouraging investors to keep in mind that selling does not have to be an all-or-nothing proposition.
Here's a look at Barletta's moves in 3D Systems:
While Barletta sold a big chunk of 3D Systems stock in November 2013, he didn't sell all his shares. He sold more in October 2014. As you can see, Barletta did quite well with his transactions in 2013:
Data by YCharts.
Here's a peek at Schneider's activities in Stratasys:
Schneider's timing here currently looks excellent, as Stratasys stock also peaked in very late 2013/early 2014. Though, again, we don't know how wise his sales will look in the future. Like Barletta, Schneider only sold part of his holdings. According to his most current disclosure, he owned Stratasys stock worth somewhere in the range of $100,001-$250,000 at year-end 2013. And his most recent periodic transaction report -- current to within 45 days -- indicates he has not sold any additional Stratasys stock.
Schneider's annual financial disclosures go back to 2011. He owned Stratasys stock as far back as 2011 -- his holdings were worth in the range of $50,001-$100,000 at year-end. Of course, it's possible he owned Stratasys even before 2011. Anyone who bought Stratasys in 2011 (or prior) and sold in late 2013 did extremely well. Remember, Schneider still owns a considerable amount of Stratasys stock, so he won't miss out if and when Stratasys goes on to hit an all-time high in the future.
Data by YCharts.
2. Buy in portions, rather than all at onceAs you can see in the first table, Barletta bought 3D Systems stock in multiple transactions. Buying a stock in portions -- or "dollar-cost averaging" into your full investment position -- is a smart move. Doing so will allow you to avoid the unfortunate possibility of buying all your shares just before a potential stock price drop. That said, it's a good idea to use a longer time period than Barletta did here.
3. Be cautious about IPOs in "hot" spacesThis takeaway also comes compliments of Barletta's activities -- though this time in ExOne, which went public in February 2013. His transactions below are a perfect illustration of what goes on with initial public offerings, especially ones in hot industries or niches: much short-term trading.
Long-term investors considering buying an IPO in a red-hot space should keep in mind that they'll likely be paying up big and that the stock could plunge if and when many short-term traders sell. If you feel strongly about a new issue's potential and have the stomach (and wallet) for extreme volatility, you may feel comfortable nibbling away from the get-go to start building your position over time. Oftentimes, however, it makes sense to wait a bit to buy -- perhaps after a company has a couple of quarterly earnings reports as a public entity under its belt.
Here are Barletta's moves in ExOne:
ExOne went public on Feb. 7, 2013, the day before Barletta bought it. Based on the stock price ranges on the transaction dates, he bought the stock in the range of $27.80-$33.60 per share and sold in the range of $40.16-$45.80. So, his gain was somewhere between nearly 20% to nearly 60% -- a tidy profit for just a bit more than three months.
Data by YCharts.
Wrap-upTo recap, our three investing takeaways illustrated through our peek at lawmakers' stock moves in 3D printing are:
- Don't fall prey to all-or-nothing thinking when it comes to selling.
- Buy in portions, rather than all at once.
- Be cautious about IPOs in "hot" sectors.
Keep these three points in mind, and you should be on your way to better investment decisions.
The article 3D Printing Stocks: 3 Things Investors Can Learn From Congress Members' Stock Moves originally appeared on Fool.com.
Beth McKenna has no position in any stocks mentioned. The Motley Fool recommends and owns shares of 3D Systems, ExOne, and Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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