Is RCKT Stock A Buy or Sell?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT).

Is RCKT stock a buy? Investors who are in the know were betting on the stock. The number of long hedge fund bets inched up by 14 in recent months. Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) was in 33 hedge funds’ portfolios at the end of December. The all time high for this statistic is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that RCKT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 19 hedge funds in our database with RCKT holdings at the end of September.

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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Peter Kolchinsky of RA Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. With all of this in mind let’s review the new hedge fund action regarding Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT).

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

At the end of December, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 74% from the previous quarter. The graph below displays the number of hedge funds with bullish position in RCKT over the last 22 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

More specifically, Perceptive Advisors was the largest shareholder of Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), with a stake worth $186.3 million reported as of the end of December. Trailing Perceptive Advisors was Tang Capital Management, which amassed a stake valued at $162.6 million. RA Capital Management, Cormorant Asset Management, and Citadel Investment Group 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 Tang Capital Management allocated the biggest weight to Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), around 24.83% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, setting aside 6.84 percent of its 13F equity portfolio to RCKT.

Now, specific money managers have jumped into Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) headfirst. RA Capital Management, managed by Peter Kolchinsky, initiated the biggest position in Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT). RA Capital Management had $117.1 million invested in the company at the end of the quarter. Jeffrey Jay and David Kroin’s Great Point Partners also made a $38.4 million investment in the stock during the quarter. The other funds with brand new RCKT positions are Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, and Guy Shahar’s DSAM Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) but similarly valued. These stocks are KB Home (NYSE:KBH), Canada Goose Holdings Inc. (NYSE:GOOS), Macquarie Infrastructure Corporation (NYSE:MIC), Copa Holdings, S.A. (NYSE:CPA), Adient plc (NYSE:ADNT), LCI Industries (NYSE:LCII), and HMS Holdings Corp. (NASDAQ:HMSY). This group of stocks’ market valuations resemble RCKT’s market valuation.

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As you can see these stocks had an average of 25.4 hedge funds with bullish positions and the average amount invested in these stocks was $367 million. That figure was $840 million in RCKT’s case. Adient plc (NYSE:ADNT) is the most popular stock in this table. On the other hand LCI Industries (NYSE:LCII) is the least popular one with only 16 bullish hedge fund positions. Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RCKT is 80.5. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and beat the market again by 0.4 percentage points. Unfortunately RCKT wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on RCKT were disappointed as the stock returned -17.5% since the end of December (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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