Hedge Funds Are Buying Rocket Companies, Inc. (RKT)

At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not Rocket Companies, Inc. (NYSE:RKT) makes for a good investment right now.

Is Rocket Companies, Inc. (NYSE:RKT) worth your attention right now? Money managers were becoming more confident. The number of long hedge fund bets went up by 5 lately. Rocket Companies, Inc. (NYSE:RKT) was in 21 hedge funds’ portfolios at the end of March. The all time high for this statistic is 22. Our calculations also showed that RKT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Dan Loeb of Third Point

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a peek at the key hedge fund action surrounding Rocket Companies, Inc. (NYSE:RKT).

Do Hedge Funds Think RKT Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 31% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in RKT a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Among these funds, Miller Value Partners held the most valuable stake in Rocket Companies, Inc. (NYSE:RKT), which was worth $69.6 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $51.2 million worth of shares. Third Point, Citadel Investment Group, and Impala Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Symmetry Peak Management allocated the biggest weight to Rocket Companies, Inc. (NYSE:RKT), around 5.17% of its 13F portfolio. Miller Value Partners is also relatively very bullish on the stock, setting aside 1.8 percent of its 13F equity portfolio to RKT.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. Third Point, managed by Dan Loeb, initiated the largest position in Rocket Companies, Inc. (NYSE:RKT). Third Point had $34.6 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $17.7 million position during the quarter. The other funds with brand new RKT positions are Joseph Samuels’s Islet Management, Brandon Haley’s Holocene Advisors, and Matthew Lindenbaum’s Basswood Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Rocket Companies, Inc. (NYSE:RKT) but similarly valued. These stocks are Carvana Co. (NYSE:CVNA), America Movil SAB de CV (NYSE:AMX), TC Energy Corporation (NYSE:TRP), Barclays PLC (NYSE:BCS), Eni SpA (NYSE:E), Banco Bradesco SA (NYSE:BBD), and Ambev SA (NYSE:ABEV). This group of stocks’ market caps resemble RKT’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.1 hedge funds with bullish positions and the average amount invested in these stocks was $1233 million. That figure was $208 million in RKT’s case. Carvana Co. (NYSE:CVNA) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 4 bullish hedge fund positions. Rocket Companies, Inc. (NYSE:RKT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RKT is 52.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately RKT wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); RKT investors were disappointed as the stock returned -24.9% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.

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