Nancy Pelosi is, almost inarguably, the best stock trader on Capitol Hill. Mimicking her investments has become an increasingly popular strategy.
In mid-January, the Representative of California’s 11th congressional district updated her stock portfolio. As per usual, most of the Congresswoman’s investments were in the tech sector — but one trade stood out in particular.
Whereas most of her recent purchases involved companies she had already been investing in (and Pelosi does tend to stick with her picks for a long time), her latest periodic transaction report, published on January 17, also revealed an interesting new position.
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The Former Speaker of the House made a $50,001 to $100,000 investment in Tempus AI on January 14. At the time, TEM shares were changing hands at a price of $31.83.
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After the news broke, Tempus AI stock (NASDAQ: TEM) went on a steep upward climb. By February 14, it had reached an all-time high (ATH) of $89.44 — equating to a 180.99% surge.
What followed was a steep correction. By press time on February 27, Tempus AI shares had receded to $55.30, having marked a 27.73% drop in the last week. This latest development has brought year-to-date (YTD) returns down to 63.80%.
Let’s take a closer look at exactly what has caused the price of Tempus AI stock to drop so rapidly.
Why did Tempus AI stock crash?
Rapid moves to the upside, particularly those that aren’t driven by fundamental developments, are generally hard to sustain.
In addition, the company’s chief executive officer (CEO), Eric Lefkofsky, quickly moved to take advantage of the newfound situation. From January 22 to January 24, Lefkofsky dumped $62 million worth of TEM stock — and as the trades weren’t made according to a 10b5-1 plan, they weren’t planned in advance.
Other key personnel followed suit. The insider selling reached a zenith on February 20, when 6 company insiders collectively sold $26 million worth of Tempus AI stock.
Then, on February 24, the business held its Q4 and FY 2024 earnings call. Despite impressive year-over-year (YoY) and sequential growth in several key metrics, both earnings per share (EPS) and revenues failed to measure up to Wall Street’s consensus estimates.
Speaking of Wall Street, several analysts have revised their outlook on Nancy Pelosi’s latest stock holding. William Blair’s Andrew Brackmann this week downgraded TEM from ‘Outperform’ to ‘Market Perform’ — as did JPMorgan’s Rachel Vatnsdal.
Is it too late to invest in Nancy Pelosi’s latest stock bet?
Lastly, readers should remember one important factor. Nancy Pelosi didn’t actually acquire a single TEM share. Instead, the Congresswoman’s investment took the form of 50 call options, with a strike price of $50. Those option contracts will expire on January 1, 2026 — so it’s obvious that Pelosi’s intention, from the beginning, was to play the long game.
With that in mind, the crash that Tempus AI stock has seen might end up being a boon, as investors can initiate long positions at a much more favorable price. Cathie Wood and Ark Invest certainly seem to think so, since they bought the dip on February 25.
Featured image via Shutterstock
