Influential senator a buy-and-sell machine

Senator Thad Cochran bought shares of Crimson Exploration Inc., a Houston-based oil company, in two trades a week apart last fall. The shares climbed for six weeks and Cochran sold them on Dec. 15 for a profit.

The Crimson transactions were just a few of the approximately 230 share trades the Mississippi Republican reported in his personal 2010 financial disclosure released last week. Cochran held dozens of the stocks for only a few days or weeks, and some companies’ shares were bought and sold repeatedly throughout the year.

“All of the senator’s investments are handled by outside brokers and he’s not personally involved in any of that,” said Cochran’s spokesman Chris Gallegos. He declined to provide details on the overall performance of the account or give the name of Cochran’s broker or brokerage firm.

Investment managers say it’s unlikely Cochran is beating the market by buying and selling so many shares.

“The taxes and the trading costs associated with the senator’s strategy are a major negative factor; however, the inevitable mis-timing of the market is what will ultimately do him in,” said Darius Gagne, a principal at Quantum Wealth Management in Culver City, California.

Cochran has served in the Senate since 1978 and is the ranking Republican on the Senate Appropriations Committee. He also serves on the Agriculture and Rules committees. He owned shares in about 110 companies through the year, among them 34 energy companies and major consumer companies such as Procter & Gamble Co., Domino’s Pizza Inc. and Walgreen Co.

Broad Ranges

The financial disclosure forms require lawmakers to report holdings and transactions in broad ranges so it’s impossible to tell exactly how many shares Cochran bought or sold in any one company — or how much money he made or lost.

Cochran’s overall assets are valued between $786,000 and $3.26 million, according to his disclosure. That includes interest in family-owned real estate partnerships and a cabin in Oxford, Mississippi. The stock account is valued between $109,000 and $1.5 million, the disclosures showed.

Cochran’s buying in 2010 began with a purchase of shares in Energy XXI (Bermuda) Ltd., an oil-exploration company. The stock jumped 40 percent in two weeks and Cochran sold some of his shares on Jan. 15. He sold more in February and again in April, just as the price went into a month-long decline. On Nov. 18, Cochran’s broker bought into Energy XXI again at a higher price than he sold the senator’s stock just six months earlier.

Good Timing

The timing of many of the trades worked to the senator’s advantage.

On Jan. 21, 2010, his broker sold shares in Anixter International Inc., a distributor of specialty wire and cables for voice and data products. The stock slid for about two weeks, from $45.76 to $40.73 on Feb. 2, when Cochran bought them back.

Then, on Feb. 22, he sold them again for $43 for a quick profit. His disclosure showed he had a capital gain of between $1,000 and $2,500 for Anixter.

“Active trading like this rarely adds value,” said Craig Larsen, a certified financial planner based in St. Charles, Illinois. “My guess is that over time it will be negative, significantly so, especially after taxes.”

In all, Cochran earned capital gains of between $37,300 and $118,300 on the trades of at least 41 companies. If he held the securities for less than a year, he’d owe tax on those gains at the individual rate, which would be 28 percent if he has no income beyond his Senate salary and could be as high as 33 percent.

Capital Gains

He reported capital gains of zero to $200 on the stock of 55 companies, according to the report. His spokesman declined to say if he lost money on those trades.

The dates of the purchases and sales suggest that at times, he did.

Cochran reported buying shares of Amgen Inc., the world’s biggest biotechnology company, on April 1. The closing stock price that day was $60.80. The stock then topped $61 and started to fall until it reported profits on April 21. The company’s shares were downgraded by Bank of America Corp. and Cochran’s broker sold at the month’s low price of $58.16.
–Bloomberg News–