Image source: White House on Flickr.
Think fast: what's the first thought that comes to mind when I say the word "Congress?" I'm willing to bet that whatever popped into your head probably wasn't something positive.
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According to national pollster Gallup, Congress's approval rating in 2014 stood at just 15%, down significantly from the 56% approval rating logged in 2001. An amusing poll from Public Policy Polling in 2013 also came to a similar conclusion, deeming Congress less popular than traffic jams, root canals, Donald Trump (before his presidential campaign), used-car salesmen, and, yes... even the rock group Nickelback.
Yet in spite of the unpopularity of lawmakers in Washington, D.C., keeping a close eye on what issues they're tackling can be important as an investor. Congressional interests, and the laws that might come about from those interests, could meaningfully affect certain industries. Plus it never hurts to know where members of Congress are putting their own money. Having a keen understanding of what stocks members of Congress own may offer unique insight on businesses that are expected by lawmakers to outperform over the long run.
Image source: Federal Reserve Bank of New York.
The 25 most commonly held stocks by members of Congress in 2013 With this in mind, and with the assistance of data aggregated by MapLight, which itself used personal disclosures from members of Congress from 2013, we'll take a brief look at the 25 stocks that are most commonly held by members of Congress as of 2013, as well as point out a few interesting observations from MapLight's findings.
Please note, this list isn't based on the total value of stock held by members of Congress, but is instead a ranking based on how many members of Congress actually hold shares in these companies. Additionally, this is based on data compiled in 2013 -- it's quite possible the holdings of members of Congress have since changed. Thus you should consider this as an intriguing starting point for your research rather than a concrete buy or sell recommendation.
Table by author. Data source: MapLight via personal Congressional disclosures as published by Office of the Clerk, U.S. House of Representatives and Office of the Secretary of the Senate, U.S. Senate.
Mind the trendsA number of trends stand out.
For starters, members of Congress, who are predominantly individuals near or at the age when they'd qualify for Social Security, are more about income preservation than seeking out aggressive growth as evidenced by their holdings. Don't get me wrong, you will find some higher growth tech mixed in here and there, but big brand-name companies with products that essentially sell themselves tend to dominate in Congressional portfolios.
Image source: Procter & Gamble.
At No. 3, for example, we have Procter & Gamble, which has demonstrated a sluggish growth rate in recent years, but has household brands like Tide detergent and Crest toothpaste in its back pocket. Procter & Gamble relies on the fact that many of its products are inelastic (meaning people buy them regardless of how well or poorly the U.S. economy is performing), and can rely on price increases for its goods to ensure it stays ahead of the inflation curve.
With the exception of Alphabet (the entity that owns Google and other subsidiaries), members of Congress are also very much attracted to dividend paying stocks. Following six years of record-low lending rates, finding a somewhat steady investment that could outpace inflation has proven difficult. Bank CDs, money market accounts, and savings accounts are all yielding around 1% or less. The answer for investors, and member of Congress, is to turn to dividend stocks.
You'll see that telecom and content staples AT&T and Verizon are both top-eight holdings. The reason behind the popularity of these two telecom giants more than likely has to do with their superior dividends. AT&T's 5.6% yield and Verizon's 4.8% payout obliterates the average yield of the S&P 500, which is closer to 2%. Similar to P&G, the need to stay "connected" via Internet, voice, or TV puts the products AT&T and Verizon offer in the borderline "basic-needs" category. This gives both companies exceptional pricing power and a bright long-term outlook.
Image source: General Electric.
You'll also note (not surprisingly) that industrial sector names and energy are well-represented. Keep in mind that the defense budget of the United States is considerably higher than that of any other country in the world, thus industrial and energy-based names are likely to be beneficiaries of the United States' robust spending. I suspect this is why we see General Electric topping the list of the most widely held stocks. Aside from General Electric's diverse business model, it's a prime beneficiary of the Defense Department's awarded contracts. Boasting a ridiculous backlog of $270 billion in orders, GE looks to be as strong as ever.
Lastly, take note of some of the names that didn't crack the top 25 and what that might imply (key word here being "might").
For example, tobacco giant Altriaslides in at No. 40, perhaps because U.S. tobacco laws have grown ever stricter over the years. Ford only ranks 35th, possibly implying that Congress doesn't have as much faith in Detroit automakers as it once did. Also, Facebookclocks in at No. 63, implying that the social media kingpin may still not be delivering a steady enough long-term outlook to satiate the buy-and-hold investor.
As a reminder, these holdings from 2013 aren't meant to be used as a sole determinant to buy or sell a stock. However, understanding how lawmakers view their own investments could potentially provide you an edge that you can use to move ever closer to hitting your retirement number.
The article The 25 Most Commonly Held Stocks by Members of Congress originally appeared on Fool.com.
Sean Williamsowns shares of Bank of America, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Berkshire Hathaway, Facebook, PepsiCo, Qualcomm, Walt Disney, and Wells Fargo. It also owns shares of ExxonMobil, General Electric Company, and Microsoft and has the following options: long January 2016 $37 calls on Coca-Cola, short January 2016 $43 calls on Coca-Cola, short January 2016 $37 puts on Coca-Cola, and short January 2016 $52 puts on Wells Fargo. It also recommends Bank of America, Chevron, Cisco Systems, Coca-Cola, Ford, Intel, Johnson & Johnson, Procter & Gamble, and Verizon Communications. 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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