Congresspeople are allowed to trade stocks — and some of their S&P 500 picks do rather well. Luckily, there's a way to cash in on their good fortune, too.
Two ETFs, Subversive Unusual Whales Democratic ETF and Subversive Unusual Whales Republican ETF, track stock trades by members of both parties of Congress. Any investor, then, can buy these ETFs to hitch their portfolios to those in the upper echelons of government.
And it can pay off handsomely. Nvidia is a top 10 holding of both Democratic and Republican lawmakers. And shares of the AI giant are up more than 170% this year. Nvidia is the only S&P 500 stock that's a top 10 position in both ETFs.
"The idea behind them is that Congress members have unique insight into regulation that may impact different companies and industries in different ways," said Cinthia Murphy of Vetta Fi. "If they apply that knowledge to their own stock selection for personal investment, you could argue there's real alpha to be gathered here."
Sizing Up Congress' Trades
How does Congress fare with stocks? The Democrats have an edge, mainly due to their heavily leaning toward giant tech stocks.
Subversive Unusual Whales Democratic returned 45% and Subversive Unusual Whales Republican ETF 20% from their February 2023 inception through June 18, 2024, found Morningstar's Zachary Evens. "Subversive Unusual Whales Democratic outpaced the iShares Russell 1000 by more than 11 percentage points, while Subversive Unusual Whales Republican ETF lagged by 13," Evens said.
And this year it's a similar story. On a price-only basis, $141 million-in-assets Subversive Unusual Whales Democratic is up 22.4%, topping the S&P 500's 18.1% gain. Meanwhile, $27 million-in-assets Subversive Unusual Whales Republican is lagging the S&P 500 with a 9.5% rise.
Again, that's not surprising. Red-hot information technology stocks account for nearly 44% of Subversive Unusual Whales Democratic versus just 20% for Subversive Unusual Whales Republican, Murphy says.
Stocks Congresspeople Like Most
The Democrats' links with the West Coast elite is clear from their stock picks. Nvidia is the biggest position in Subversive Unusual Whales Democratic at 13% of the portfolio. And it's followed by Microsoft and Alphabet at 9.7% and 4.5%, respectively.
And yes, Subversive Unusual Whales Republican plunks 2.8% of it portfolio into Nvidia. But that's only its No. 2 largest position. The ETF's largest single stake, 3.2%, is in JPMorgan Chase. And the third largest bet is Comfort Systems USA, an electrical components maker, at 2.6%.
Ironically one of Republican's biggest losers is a tech stock. Shares of Intel, are down nearly 31% this year. Intel is not a top 10 holding by Democrats.
Should You Invest Like Congress?
If you're looking to beat the S&P 500, following the portfolios of members of Congress is as good a strategy as many others, Murphy says. "I could see how investors can easily own one, own both, hedge one against the other as unique opportunity sets," Murphy said. And there could be more choice coming. Tuttle Capital Management has filed registration plans for similar funds to track Congressional stock picks.
You might need to hurry, though, if this strategy appeals to you. A group of U.S. senators are mulling stricter restrictions on investments people in Congress may make.
But in the meantime, follow the money. "If you want to invest in the same way Congress members are investing (their personal money), these ETFs are for you," Murphy said.
Congress' Favorite Stocks
Ranked by portfolio size
| Top 10 Democratic Picks | Symbol | YTD Ch. | Top 10 Republican Picks | Symbol | YTD Ch. |
|---|---|---|---|---|---|
| Nvidia | NVDA | 171.5% | JPMorgan Chase | JPM | 22.0% |
| Microsoft | MSFT | 23.6% | NVIDIA | NVDA | 171.5% |
| Alphabet | GOOG | 36.5% | Comfort Systems USA | FIX | 50.5% |
| Amazon.com | AMZN | 31.4% | United Therapeutics | UTHR | 49.5% |
| Apple | AAPL | 20.5% | Arista Networks | ANET | 54.4% |
| Salesforce | CRM | -4.5% | Intel | INTC | -30.8% |
| PIMCO Enhanced Short Maturity Active | MINT | -0.8% | Elevance Health | ELV | 13% |
| CrowdStrike | CRWD | 46.4% | National Fuel Gas | NFG | 8.4% |
| Netflix | NFLX | 39.2% | Texas Instruments | TXN | 19.1% |
| Government Obligations Fund | FGXX.X | -27.4% | Shell | SHEL | 10.2% |
