A disclosure published on October 14 reveals that Michael McCaul, the congressional representative of Texas’s 10th district, invested between $100,001 and $250,000 in Howmet Aerospace (NYSE: HWM).
The trade was executed on September 16 — at which point HWM shares were trading for $94.59. At press time, Howmet stock is trading at $104.17 — having rallied by an impressive 93.87% on a year-to-date (YTD) basis.
Since McCaul’s purchase, HWM has surged by 10.12%. According to the latest data from the US Senator Stock Trading Radar by Finbold, the Congressman could be up anywhere from $10,120 to $25,300 on this single trade.
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McCaul’s well-timed HWM trade
Howmet Aerospace is not a defense contractor per se — it is, however, a significant supplier for various important contractors. To use the most important example, HWM supplies titanium for Lockheed Martin (NYSE: LMT) — the two companies even had a legal dispute surrounding supply prices that was settled on May 3.
Amidst geopolitical instability and an upcoming election which will almost certainly bring about increased defense spending, it’s easy to see how a sympathy play for high-performing defense stocks could be a wise investment.
Still, the timing of the trade is slightly suspicious. The Congressman has managed to capture all of the positive price action that occurred in the last 30 days, having bought the shares just before a notable upswing.
The primary driver of suspicion is McCaul’s congressional committee assignment — the Representative is currently serving as the chair of the Committee on Foreign Affairs. As such, the congressman is privy to information the public is not — information that, when publicly revealed, will significantly shape investor sentiment regarding the defense sector and HWM stock price by proxy.
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Equity researchers are bullish on HWM
On the whole, Wall Street analysts are cautiously optimistic regarding HWM. On August 8, the defense supplier announced the issuance of $500 million in notes aimed at refinancing high-interest debt.
Scott Deuschle of Deutsche Bank raised his price target from $106 to $125 on October 3 — expecting an earnings beat as well as increased guidance from the company’s next earnings call due November 6. At press time, this is the highest price target issued for HWM — and if met, it would account for a 19.9% increase in price.
Based on the ratings of the 17 equity researchers who track the stock, HWM is a consensus ‘Strong Buy’ — although the average price target of $109.36 is just 5.24% greater than the HWM share price at the time of writing.
McCaul’s disclosure also revealed a $100,001 to $250,000 purchase of Aramark stock (NYSE: ARMK) — his congressional colleague, Jonathan L. Jackson of Illinois, followed suit and invested $15,001 to $50,000 in the company just a week later.
