Congress Loves These Safe-Haven Stocks

According to a recent report by The Washington Post (NYSE:WPO), the financial gap between Americans and lawmakers continues to grow.  Between 1984 and 2009, the median net worth of a member of the House of Representatives more than doubled from $280,000 to $725,000 in inflation-adjusted 2009 dollars, excluding home equity.

However, over that same period of time, the wealth of the average American family has declined, from $20,600 to $20,500, according to the Panel Study of Income Dynamics from the University of Michigan. The data excludes home equity, as it is not included in congressional reporting, and 1984 was chosen because it is the earliest year for which consistent wealth statistics are available.

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With the mass amounts of wealth in Congress, many wonder what investments our lawmakers favor.  Insider trading laws have come under more scrutiny this year as apparently the laws do not apply to members of Congress.  Furthermore, a study at Georgia State University concludes that legislators in Congress make “significant abnormal returns” in the stock market. The developments have placed which stocks Congress trades under a closer watch.

With the Dow Jones Industrial Average (NYSEARCA:DIA) and the S&P 500 (NYSEARCA:SPY) showing extreme volatility (NYSE:VXX) and lackluster returns this year, here are the most popular safe-haven stocks and sectors used in Congress.

The utility sector (NYSE:XLU) is this year’s best performing class in the S&P 500.  Utility stocks are generally classified as defensive investments that cushion against volatility and downturns in the economy.  Even in dismal economic times, people need to heat and light their households.  When it comes to Congress, the most popular stock is General Electric (NYSE:GE), with 94 members holding shares of the energy giant.  On Tuesday, GE announced a deal to buy the U.S. retail-deposit business of life insurer MetLife Inc. (NYSE:MET).  Earlier this month, GE also announced its fourth dividend increase in only two years.  Congress also favors utility stocks such as Duke Energy Corp. (NYSE:DUK) and Emerson Electric Co. (NYSE:EMR).  On Wednesday, Duke Energy hit a fresh 52-week high.

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The consumer staples sector is another bright stop for the portfolios in Congress.  The Consumer Staples Select Sector SPDR (NYSE:XLP) has gained more than 10 percent this year.  The sector includes manufacturers and distributors of food, beverages and tobacco and producers of non-durable household goods and personal products.  In Congress, the second most popular stock is Procter & Gamble Co. (NYSE:PG), with 74 members holding shares in the company.  P&G shares have gained 3.3 percent, and currently pay a 3.2 percent dividend.  Congress also favors Johnson & Johnson (NYSE:JNJ), Coca-Cola (NYSE:KO), PepsiCo. Inc. (NYSE:PEP), Wal-Mart (NYSE:WMT) and Kraft Foods (NYSE:KFT).

Pharmaceuticals are also considered to be a consumer staple.  According to a report from consulting firm IMS Health, Americans spent more than $300 billion on prescription drugs in 2010.  The most popular pharmaceutical stocks in Congress are Pfizer Inc. (NYSE:PFE), Merck & Co. (NYSE:MRK) and Bristol-Myers Squibb (NYSE:BMY).  Overall, Pfizer is the sixth most popular stock in Congress with 61 members holding shares.  Shares of Pfizer have gained almost 23 percent year-to-date.  Meanwhile, Merck and Bristol-Myers Squibb have gained 4 percent and 32 percent for the year, respectively.

To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com