In this article, we discuss the 10 stocks to consider in the portfolio of Pat Fallon.
Patrick Fallon, often referred to as “Pat” Fallon, is a businessman and politician hailing from Massachusetts. Fallon is a member of the Republican Party and serves on the United States House of Representatives as a member of the fourth congressional district in Texas. Fallon is one of the most active stock traders in the US Congress. According to an analysis of the stock trading disclosures made by Fallon, the lawmaker bought equities worth $9.2 million between January 2021 and January 2022. During the period, he also sold stocks worth $8.6 million.
This equates to a net spend of around $500,000. The filings, mandatory under the Stop Trading on Congressional Knowledge (STOCK) Act of April 2012, show that Fallon made 190 different transactions related to stocks in the past year. 63 of these were buying of some sort while 127 involved selling. Even though he regularly discloses his trades, Fallon has come under fire in the media for failing to disclose stock trades worth as much as $17 million at the proper time. Some trades he made last year were disclosed as much as four months after being made.
Under the law, Fallon is obliged to disclose trades within 30 days of becoming aware of the transaction. Fallon also serves on the House Armed Services Committee and has made trades related to the industry in 2021. Lawmakers in the US have come under increased scrutiny regarding their Wall Street activity in recent months, especially in the context of the COVID-19 pandemic and the impact of important policy decisions on businesses. There have been calls to ban lawmakers from trading stocks altogether.
Some of the top stocks to consider in the portfolio of Pat Fallon include Amazon.com, Inc. (NASDAQ:AMZN), PayPal Holdings, Inc. (NASDAQ:PYPL), and Block, Inc. (NYSE:SQ), among others discussed in detail below.
Office of Representative Pat Fallon, Public domain, via Wikimedia Commons
Our Methodology
The stocks listed below were picked from the Periodic Transaction Report(s) that Pat Fallon is obliged to file. It is important to clarify that the stocks listed below were picked from the public record of investments Fallon and his family have made in the past few months. The purchases may not have been made by Fallon himself but only disclosed on behalf of his family.
Hedge fund sentiment was included as a classifier as well. The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
Pat Fallon Stock Portfolio: Stocks To Consider
10. Owl Rock Capital Corporation (NYSE:ORCC)
Number of Hedge Fund Holders: 14
Owl Rock Capital Corporation (NYSE:ORCC) is a business development firm. According to a security filing dated December 29, 2021, Fallon purchased shares of Owl Rock Capital Corporation on September 28 and November 30 of last year. Both purchases fell in the $50,000 to $100,000 range.
Owl Rock Capital Corporation is slowly becoming more popular among hedge funds. At the end of the third quarter of 2021, 14 hedge funds in the database of Insider Monkey held stakes worth $180 million in Owl Rock Capital Corporation, compared to 15 the preceding quarter worth $298 million.
Just like Amazon.com, Inc., PayPal Holdings, Inc., and Block, Inc., Owl Rock Capital Corporation is one of the stocks that elite investors are flocking to.
9. American Airlines Group Inc. (NASDAQ:AAL)
Number of Hedge Fund Holders: 30
American Airlines Group Inc. (NASDAQ:AAL) operates as a network air carrier. There is positive hedge fund sentiment around the stock. At the end of the third quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $650 million in American Airlines Group Inc., up from 25 in the preceding quarter worth $620 million.
Mandatory filings by Pat Fallon dated early November last year show that the lawmaker sold American Airlines Group Inc. stock worth somewhere between $1,000 and $15,000 on October 4. The transaction in this regard was disclosed on November 2.
In its Q2 2020 investor letter, McLain Capital, an asset management firm, highlighted a few stocks and American Airlines Group Inc. was one of them. Here is what the fund said:
“American Airlines (AAL) : With a $6.5bln market cap & adjusting for the current cash burn & incremental net debt, American currently trades at a higher pro-forma enterprise value than it did at the beginning of the year, while revenues are off 80-90%. The two year notes, AAL 5% 6/2022, currently trade 52 cents on the dollar at a yield to maturity of 46%, implying zero equity value for the common stock. At it’s current projected pace of cash burn, the company will expend its current liquidity before year end. American is one of the most popular stocks among retail investors.”
8. Southwest Airlines Co. (NYSE:LUV)
Number of Hedge Fund Holders: 39
Southwest Airlines Co. (NYSE:LUV) is a passenger airline firm. A Periodic Transaction Report from November 30 last year shows that Fallon purchased Southwest Airlines Co. stock worth $100,000-$250,000 on November 19 and disclosed the transaction in this regard on November 20.
As worries about a resurgent COVID-19 rise, hedge funds have been reducing exposure to Southwest Airlines Co. stock. At the end of the third quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth $729 million in Southwest Airlines Co., compared to 49 in the preceding quarter worth $926 million.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Southwest Airlines Co. was one of them. Here is what the fund said:
“One of our goals as we constantly monitor the portfolio is to see if we can better deploy capital by lowering the probability of being wrong. This motivation drove our swap of Delta Airlines into Southwest Airlines during the quarter. We expect a huge rebound in airline traffic as COVID-19 concerns abate, but we are much more comfortable that it will be led by leisure travel. Conversely, we are more uncertain of the ultimate level and timing of business travel demand. Southwest, with its simple fare strategy and high leisure travel exposure, is better positioned to capture the ongoing traffic rebound without having to answer the business travel demand question on which Delta is more dependent. As a result, we expect Southwest to play serious offense as it gains share in the rebounding travel market and can fully leverage the massive pent-up demand for travel that we expect. In addition, the U.S. lead in vaccination over Europe favors Southwest over Delta, given the domestic focus of Southwest. COVID-19 has changed many things, but humans by their very nature like to move, and many of them will do it on Southwest.”
7. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 51
Chevron Corporation (NYSE:CVX) is an integrated oil and gas firm based in California. Hedge funds have been piling into the stock as energy prices rise. At the end of the third quarter of 2021, 51 hedge funds in the database of Insider Monkey held stakes worth $4.4 billion in Chevron Corporation, up from 50 in the preceding quarter worth $4.2 billion.
Latest filings from Pat Fallon reveal that the lawmaker sold Chevron Corporation twice in October 2021, once on October 1 and the second time on October 18. The first transaction was worth between $1,000 and $15,000 while the second one was between $100,000 and $250,000.
In its Q1 2021 investor letter, ClearBridge Investments highlighted a few stocks and Chevron Corporation was one of them. Here is what the fund said:
“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. We added to low-cost, high-quality energy names, (including) Chevron. We are positive on the company’s strong balance sheets, competitive positions and exposure to an economic recovery.”
6. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 57
Verizon Communications Inc. (NYSE:VZ) is a communications technology firm. Filings from February 8 show that Pat Fallon sold Verizon Communications Inc. stock worth somewhere between $250,000 and $500,000 on January 7 this year.
Hedge funds have also been selling Verizon Communications Inc. stock. At the end of the third quarter of 2021, 57 hedge funds in the database of Insider Monkey held stakes worth $10/3 billion in Verizon Communications Inc., compared to 63 in the preceding quarter worth $10.9 billion.
In addition to Amazon.com, Inc., PayPal Holdings, Inc., and Block, Inc., Verizon Communications Inc. is one of the stocks that smart investors are buying.
In its Q1 2021 investor letter, Miller/Howard Investments, an asset management firm, highlighted a few stocks and Verizon Communications Inc. was one of them. Here is what the fund said:
“We sold Verizon (VZ) based on concerns over how much they might spend in ongoing spectrum auctions. Management may legitimately view spending billions of dollars to expand their spectrum holdings as necessary, but we believe the payoff will be slow and will make it challenging to grow the dividend at a good pace.”
5. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)
Number of Hedge Fund Holders: 74
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) provides endpoint and cloud workload protection. Major hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in CrowdStrike Holdings, Inc. with 7.5 million shares worth more than $1.8 billion.
Securities filings from Pat Fallon dated November 4 reveal that the lawmaker sold CrowdStrike Holdings, Inc. stock worth somewhere between $100,000 and $250,000 on October 1 last year, disclosing the transaction in this regard on November 2.
In its Q1 2021 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and CrowdStrike Holdings, Inc. was one of them. Here is what the fund said:
“CrowdStrike provides cloud-based software used in the security of computers, servers, and mobile phones. The stock pulled back a bit during the quarter as investor sentiment shifted away from stocks with higher valuation multiples. We remain shareholders, as the protection of enterprise assets and cloud workloads from various forms of cyberattacks remains more important than ever for many enterprises, and we believe this will continue to result in a strong demand environment for CrowdStrike’s innovative products and services.”
4. Twitter, Inc. (NYSE:TWTR)
Number of Hedge Fund Holders: 94
Twitter, Inc. (NYSE:TWTR) owns and runs a social networking platform. The two latest filings by Fallon have been disclosures on purchases of Twitter, Inc. stock. The lawmaker bought shares of the firm on January 19 and January 24. The former transaction was worth $1000-$15,000 while the latter was worth $50,000-$100,000.
Twitter, Inc. has also witnessed a flurry of hedge fund interest in recent months. At the end of the third quarter of 2021, 94 hedge funds in the database of Insider Monkey held stakes worth $6.3 billion in Twitter, Inc., up from 89 in the preceding quarter worth $6 billion.
RGA Investment Advisors, in its Q1 2021 investor letter, mentioned Twitter, Inc.. Here is what the fund has to say in its letter:
“‘The bird has wings’—Twitter’s quarter started off somewhat ominously, with Twitter the worst performing stock in the S&P 500 following the January 6th insurrection and questions about the stickiness of the userbase after permanently suspending the account of President Trump.8 By the end of the quarter, Twitter was one of the best performers in the index after exceptionally strong fourth quarter earnings and guidance for the year and an upbeat analyst day that highlighted a rapidly evolving product roadmap placing the timeline at the center of ephemeral (fleets), long form (Revue) and voice (Spaces). The improvements to the experience makes the platform more accessible and provides more opportunity to continue growing the userbase. Importantly, Twitter also embraced what we have been calling “creative empowerment” in previewing SuperFollows and a host of features designed to help content creators and contributors monetize their own audience on Twitter itself. These developments, alongside considerable progress on the advertising platform give us growing conviction that Twitter will deliver on its largely untapped opportunity—in other words, the value creation opportunity on top of the low multiple we were able to build our position at. Elliot spoke at length about these developments on Yet Another Value Podcast with Andrew Walker and The Business Brew with Bill Brewster, which we invite you to check out.”
3. Block, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 98
Block, Inc. is a payments technology firm. A growing number of hedge funds have turned bullish on the stock in the past few months. At the end of the third quarter of 2021, 98 hedge funds in the database of Insider Monkey held stakes worth $8 billion in Block, Inc., up from 94 in the preceding quarter worth $10 billion.
Block, Inc. has also been on the radar of Pat Fallon. The lawmaker, per filings from November last year, sold and bought new shares of Block, Inc. on the same day in October. The transactions, from October 4, were disclosed on November 2. The shares sold were worth between $1,000 and $15,000 while those bought were worth between $100,000 and $250,000.
In its Q1 2021 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Block, Inc. was one of them. Here is what the fund said:
“We established a position in leading Financial Technology provider Square during the quarter. Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers).
The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion (due to pass through costs, gross profit is more reflective of top-line growth) and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown from nothing in 2015 to $1.2 billion gross profit last year) has a particularly large opportunity with its powerful ecosystem of digital financial services including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app.
We estimate that the company can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while most of the company’s current profit is from its Seller Business, we believe most of Square’s future value will be from its Cash App business.”
2. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 123
PayPal Holdings, Inc. operates as a technology platform for digital payments. Mandatory filings from December 29 of last year reveal that Pat Fallon made two transactions related to PayPal Holdings, Inc. stock on November 15. Both transactions involved buying shares of the company worth between $100,000 and $250,000.
As growth stocks undergo a period of correction, hedge funds have been offloading PayPal Holdings, Inc. stock. At the end of the third quarter of 2021, 123 hedge funds in the database of Insider Monkey held stakes worth $12.8 billion in PayPal Holdings, Inc., compared to 143 in the preceding quarter worth $16.4 billion.
In its Q4 2020 investor letter, Polen Capital Management, an asset management firm, highlighted a few stocks and PayPal Holdings, Inc. was one of them. Here is what the fund said:
“For the full year 2020, one of the top performers was PayPal, which we purchased in 2019, the company continues to take market share in digital payments and has seen an acceleration in user adoption and engagement, especially within their “silver tech” or older user demographic. We expect many more years of ongoing double-digit growth from their various business segments and new initiatives.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 242
Amazon.com, Inc. is a diversified technology firm based in Washington. It is one of the favorite stocks in the hedge fund industry. Among the hedge funds being tracked by Insider Monkey, London-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. with 3.9 million shares worth more than $12.8 billion.
Filings from early November show that Fallon sold Amazon.com, Inc. stock worth somewhere between $1,000 and $15,000 on October 4 and October 26 last year. The transactions in this regard were disclosed on November 2.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. was one of them. Here is what the fund said:
“Amazon (AMZN):We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment:1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon, we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is …”read the entire letter here]
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