Nancy Pelosi has been the topic of heated discussion for quite some time, not just for her political stances but her stock portfolio too.
Some estimate her net worth to be close to $50 million while others believe it to be nearer $200 million. The obvious question is how did a public representative on a “modest” salary accumulate such wealth?
The fuller picture is that Nancy’s husband has a background in finance, and venture capital specifically, so it’s not entirely outlandish that the two have collectively accumulated an enormous net worth. But is it because of financial acumen or something more?
What has been the subject of scrutiny is whether some of the transactions originate from due diligence or inside information? Regardless of the debate, the fact remains that Nancy and her husband have a portfolio that has delivered stellar returns. So what stocks are featured in their portfolio?
The Pelosis took a position in Google’s parent company, Alphabet, via the exercise of call options.
A call option is a derivative that permits the holder to buy shares at a fixed price for a specific time frame. The Pelosis exercised call options on Class A shares of Alphabet mid-last year and ended up owning 4,000 shares of stock.
Last December, they exercised a further 200 call options. Because a single options contract corresponds to 100 shares, that exercise resulted in 20,000 shares of Alphabet being added to their portfolio.
For those with an eye to long-term investing, Alphabet is a favored stock with an enormous moat, margins, and future prospects. So it’s no surprise the Pelosis have decided to park a considerable portion of their net worth in this flagship stock.
We crunched the numbers on Alphabet to peer back the veil on what the Pelosis might find attractive in holding Alphabet shares beyond the points mentioned above, and discovered a compelling valuation. The share price has 34.7% upside to $130.09 per share at the time of research based on a discounted cash flow forecast analysis.
When Satya Nadella took over Microsoft, he transformed the business model. Buying Windows on a CD-ROM was a thing of the past. The future under Satya was “The Cloud” and Gaming. His vision and execution have ensured Microsoft never plateaued as an old-tech dinosaur, like IBM, for many years, but instead grew to compete aggressively with Alphabet and Amazon.
The Pelosis didn’t miss the trend. They built a position in Microsoft using their seemingly favored method, buying call options initially and exercising them later.
In the first quarter last year, they exercised MSFT which resulted in them owning 25,000 shares. Earlier this year, in Q2, they exercised a further 50 call options, leading to an additional 5,000 shares.
When we ran the numbers on MSFT, it’s clear why the Pelosis are still confident holding shares for the long-term; fair value sits at $285 per share.
Among the most controversial of the Pelosis holdings is Nvidia. While they did sell the stock early in Q3 of this year by offloading 25,000 shares and took a hefty loss of over $300,000, prior transactions reveal more to the story.
At face value, it appears the sale was the result of a more bearish outlook on the economy. Indeed that thesis has proven correct, with Nvidia shares down by 39.9% this year.
But looking back to 2021, we can see the Pelosis bought 100 call options on Nvidia in June and July. By June of this year, they had amassed a shareholding through the exercise of calls and separate share purchases of 20,000 shares.
Skeptics accused the couple of insider trading when it became clear (after they sold) that Nvidia would be restricted from making sales of certain chips to China.
Did they sell because of a bearish outlook on the economy or because they had prior knowledge of the President’s decision to ban certain chip sales?
Regardless of what you believe, it’s worth paying close attention to the Pelosis portfolio because they have a knack for timing the market well, over and over again.