What Makes a Stock "Republican"?
A fascinating new report reveals the different ways Democratic and Republican politicians invest.
There's an old Wall Street saying that a stock doesn't know who owns it, so there's no need to feel bad about dumping it. But it's also true that not every stock is owned by the same kind of person. In this election season, it has become very clear that Democratic and Republican politicians favor very different kinds of investments.
The nonpartisan Center for Responsive Politics recently performed the Herculean task of determining which members of Congress own what stocks. Its reports, which you can browse here, are an enthralling psychofinancial portrait of political America. For example, it turns out that oil giants BP and ExxonMobil as well as tobacco/food company Altria are overwhelmingly favored by Republicans, while Democrats are heavily into tech stocks such as Sun Microsystems, Texas Instruments, and Vodafone, the British-based mobile-phone giant.
CRP released its report last month after reviewing the annual personal financial disclosure forms filed by members of Congress. Before CRP crunched the numbers, figuring out whether a stock skewered red or blue would have been practically impossible. That's because the disclosure forms are not only difficult to read—as many as half are handwritten—but also difficult to analyze because many members choose their own version of disclosure instead of sticking to the standard 13-page form. Rep. Jane Harman, a Democrat from El Segundo, Calif., and one of the wealthiest members of Congress, provided 63 pages of information on her extensive investments, which are worth between $168.6 million and $289 million. (One of the other problems with the disclosure rules is that there's no requirement for exact math, leading to gaping ranges.) Others simply attach a cover letter to reams of brokerage statements, says Daniel Auble, the researcher who spent several months crunching the numbers. "We're trying to use the data to determine whether their investments are related to their committee assignments, but we're just at the beginning of that process," says Auble.
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.)
Because this is the first year that the data are available, it's impossible to make comparisons to previous years, though Auble says the group hopes to eventually go back at least a year or two. The goal this year, Auble said, was to get something up in "a usable form" before the midterm elections. Though candidates for federal office are also required to file disclosures, Auble says CRP didn't look at that data this time around simply because there was just too much of it.
Angel predicts the data disclosure will prompt members of Congress to buy and sell for political purposes. "I'm guessing that nobody wants to take a PR-hit. What would it say if you represent Michigan and don't own stock in Ford or GM?" says Angel. Indeed, based on the data, only one member of Michigan's congressional delegation owned stock in troubled Ford Motor Co. last year: Republican Rep. Dave Camp. Is it just a coincidence he's headed for an easy victory on Tuesday?
Michelle Leder writes a daily blog at www.footnoted.org that looks at SEC filings and is the author of Financial Fine Print: Uncovering a Company's True Value.