To The Moon

$Pepsi(PEP)$

It was a tough end to the trading week, with a broad sell-off taking hold across nearly all major sectors on Friday. That red streak wasn’t isolated either—when you zoom out and look at the performance across the last five trading sessions, the trend remains firmly negative. Investor sentiment has been deteriorating, and volatility is creeping back in. But here’s the thing: while the last week or two might look bleak, the broader picture tells a more nuanced story.

Over the past few months, many individual names across sectors like tech, industrials, and even parts of consumer staples have posted surprisingly strong returns. Some are up well into the double digits since the start of spring, thanks in part to improving earnings reports, softening inflation, and a resilient labor market. And that rebound may be exactly what’s triggered a wave of congressional selling activity—a phenomenon we’ve been tracking closely.

In this report, we’re not only breaking down which companies are being sold by members of Congress, but we’re asking the deeper question: what are these lawmakers seeing that retail investors might be missing?

And more importantly — does their track record suggest we should be paying closer attention?

Congressional Trading: Consistent Outperformance, Questionable Ethics

Every year, a group of lawmakers quietly and consistently post trading returns that would make even the most seasoned hedge fund managers envious. Many investors have dismissed this over the years as coincidence, or assumed these trades were passive and managed by blind trusts. But with greater transparency laws now in place, we’re seeing just how active many of these members are—and how consistently they beat the market.

Some members of Congress have posted returns in excess of 100% in a single year. Over a decade, the results become even more eye-popping. While the S&P 500 has climbed 217% over the last 10 years (as of mid-2025), some congressional portfolios—like that of Nancy Pelosi and her household—have ballooned over 746% in the same timeframe, according to publicly available trading disclosures.

It begs the question: how are lawmakers consistently outpacing the index, even during years of market turbulence, monetary tightening, or global instability?

While no direct proof of insider trading has been substantiated, it’s hard to ignore the coincidence of perfectly timed trades, especially those surrounding pending legislation, regulatory changes, or major industry announcements.

And the public has taken notice. Over the past few years, the topic of banning congressional stock trading has evolved from a fringe policy debate to a bipartisan rallying cry. Even former President Donald Trump recently weighed in, stating that he would sign a bill banning members of Congress from trading individual stocks.

This followed the proposal of the so-called "Pelosi Act"—legislation that would prohibit lawmakers and their spouses from buying, selling, or even holding individual equities while in office. While the bill has yet to pass, its mere introduction signals a growing mistrust in the motivations behind congressional trades.

The irony? Some of the very lawmakers who initially championed the ban have become active traders themselves after being elected—highlighting just how conflicted the system remains.

So Why Focus on Their Sales Right Now?

Most coverage around congressional trades focuses on what stocks lawmakers are buying. But this time, we’re turning the lens in the other direction—because many of these members are now quietly selling.

In fact, several members who historically accumulate positions during downturns are now trimming or exiting certain names—even as these companies trade near historically low valuations. That behavior is a notable deviation from the past, and may suggest deeper concerns or foresight on what’s to come.

Whether they’re reallocating, managing risk, or reacting to macro data that hasn't yet been fully priced in, the trend is unmistakable: lawmakers are unloading shares. And when individuals with access to sensitive policy discussions begin offloading positions en masse, it’s worth asking why.

Let’s begin with the high-profile example: PepsiCo.

Stock in Focus: PepsiCo (PEP)

Ticker: PEP Current Status: Trading near 52-week lows Congressional Sentiment: Heavy selling Institutional Sentiment: Bullish accumulation

PepsiCo, a global staple in food and beverages, is one of the most recognizable and widely held companies in the world. Yet despite its reputation for consistency and dividend reliability, it’s becoming clear that many members of Congress are heading for the exits.

Here’s what the numbers show:

• Down 14% YTD (as of June 2025)

• Down 20% over the past 12 months

• Up just 38% over the last 10 years (excluding dividends)

• Severely underperforming the S&P 500 over multiple timeframes

That poor long-term performance—despite operating in a relatively defensive sector—might explain why congressional portfolios have started to jettison the stock. But it also raises an important question: is this an overreaction, or is there something more fundamental going on?

Valuation Tells a Different Story

On paper, PepsiCo looks deeply undervalued by multiple metrics:

• Forward P/E of 16.3x — well below its 5-year average of 23.8x

• Dividend yield of 4.35% — the highest in the last five years, and far above the 5-year average of 2.9%

• Estimated intrinsic value: $152/share based on our three-model average (DCF, multiples, and dividend discount)

Wall Street sentiment, while neutral overall, still sees 17% upside to fair value over the next 12 months. Meanwhile, our internal valuation models suggest that at current prices, PepsiCo is trading with a 15% margin of safety—a significant buffer for long-term investors seeking stability and passive income.

But Here’s the Catch: Weak Growth Prospects

Despite strong brand equity and pricing power, PepsiCo’s projected growth over the next few years is underwhelming:

• Revenue growth: ~1% (below inflation and the sector median)

• EPS growth: ~4% over the next 3–5 years, down from its 5-year average of ~6–7%

• Free cash flow per share: Flat or declining in real terms

That sluggish growth outlook could explain the divergence in sentiment. While institutions are accumulating shares—suggesting confidence in the company’s long-term durability and income profile—members of Congress may be more focused on total return and thus gravitating toward higher-growth or more speculative opportunities.

It’s also worth noting that PepsiCo has beaten Wall Street earnings expectations in 3 of the last 4 quarters. But the most recent quarter saw a slight miss, perhaps triggering a reassessment among some high-information investors.

Institutions vs. Congress: A Telling Split

Over the last 12 months:

• Institutional buying: ~$20 billion

• Institutional selling: ~$10.5 billion

• Net institutional inflow: Positive

• Q1 2025 alone: Institutions bought $5.4 billion, sold $3 billion

That’s a bullish signal from the smart money, which often has longer-term investment horizons and deeper analytical resources. In contrast, the wave of congressional selling may reflect shorter-term sentiment shifts or an attempt to lock in gains after a brief rally.

Either way, the divergence between these two groups presents a compelling case study in investor psychology—and perhaps a signal for opportunistic contrarians.

Our Intrinsic Valuation & Buy Zones

We’ve run our full suite of valuation models and established several potential buy zones for different types of investors:

• Intrinsic Value (Base Case): $152

• 15% Margin of Safety Buy Zone: $129

• 20% MOS Buy Zone: $121

• 25% MOS Buy Zone: $114

At current levels (around $129–130), the stock offers a reasonable entry for long-term income-focused investors. The dividend is safe, the payout ratio is conservative, and valuation metrics are compelling.

But if you’re growth-focused or seeking momentum, it may be worth waiting—or looking elsewhere.

Key Questions for Investors

As we continue this series, we’ll dig deeper into seven more stocks that members of Congress are actively selling. But before we move on, let’s pause on PepsiCo and ask a few key questions:

• Is this a classic value trap, or a mispriced dividend champion?

• Are lawmakers rotating out of low-growth defensives to chase tech or AI-driven names?

• Are institutional investors seeing the kind of long-term value that public sentiment is missing?

• And finally—who’s making the smarter bet: Congress or Wall Street?

Stay Tuned — More Congressional Sales Ahead

This is just the beginning. In upcoming deep dives, we’ll reveal the full list of eight companies that congressional filings show are being sold—and unpack whether those moves are justified by macro data, earnings trends, or simply speculation.

So — what do you think about PepsiCo? Is it a buy, hold, or sell at current levels? Are you siding with Congress and staying away—or following institutions into what could be a deeply mispriced opportunity?

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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