In this article we are going to use hedge fund sentiment as a tool and determine whether Rocket Lab USA Inc. (NASDAQ:RKLB) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is RKLB a good stock to buy now? Investors who are in the know were taking an optimistic view. The number of bullish hedge fund positions advanced by 26 in recent months. Rocket Lab USA Inc. (NASDAQ:RKLB) was in 26 hedge funds’ portfolios at the end of September. Our calculations also showed that RKLB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind let’s take a gander at the new hedge fund action regarding Rocket Lab USA Inc. (NASDAQ:RKLB).
Glen Kacher of Light Street Capital
Do Hedge Funds Think RKLB Is A Good Stock To Buy Now?
At Q3’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26 from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in RKLB a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Stepstone Group was the largest shareholder of Rocket Lab USA Inc. (NASDAQ:RKLB), with a stake worth $281.3 million reported as of the end of September. Trailing Stepstone Group was Light Street Capital, which amassed a stake valued at $36.7 million. Washington Harbour Partners, Citadel Investment Group, and Soroban Capital Partners 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 Stepstone Group allocated the biggest weight to Rocket Lab USA Inc. (NASDAQ:RKLB), around 18.23% of its 13F portfolio. Washington Harbour Partners is also relatively very bullish on the stock, designating 3.34 percent of its 13F equity portfolio to RKLB.
As one would reasonably expect, key hedge funds were breaking ground themselves. Stepstone Group, managed by Jose Fernandez, initiated the biggest position in Rocket Lab USA Inc. (NASDAQ:RKLB). Stepstone Group had $281.3 million invested in the company at the end of the quarter. Glen Kacher’s Light Street Capital also made a $36.7 million investment in the stock during the quarter. The following funds were also among the new RKLB investors: Mina Faltas’s Washington Harbour Partners, Ken Griffin’s Citadel Investment Group, and Eric W. Mandelblatt’s Soroban Capital Partners.
Let’s also examine hedge fund activity in other stocks similar to Rocket Lab USA Inc. (NASDAQ:RKLB). We will take a look at Dun & Bradstreet Holdings, Inc. (NYSE:DNB), ShockWave Medical, Inc. (NASDAQ:SWAV), Wyndham Hotels & Resorts, Inc. (NYSE:WH), Gold Fields Limited (NYSE:GFI), Woodward Inc (NASDAQ:WWD), WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC), and Pure Storage, Inc. (NYSE:PSTG). All of these stocks’ market caps resemble RKLB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DNB | 33 | 627041 | -12 |
| SWAV | 25 | 264209 | -2 |
| WH | 26 | 806756 | 2 |
| GFI | 15 | 144585 | -2 |
| WWD | 25 | 660155 | 3 |
| WSC | 56 | 1968445 | 4 |
| PSTG | 28 | 714127 | -3 |
| Average | 29.7 | 740760 | -1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.7 hedge funds with bullish positions and the average amount invested in these stocks was $741 million. That figure was $589 million in RKLB’s case. WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC) is the most popular stock in this table. On the other hand Gold Fields Limited (NYSE:GFI) is the least popular one with only 15 bullish hedge fund positions. Rocket Lab USA Inc. (NASDAQ:RKLB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RKLB is 31.5. 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 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 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately RKLB wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); RKLB investors were disappointed as the stock returned -22.3% since the end of September (through 12/9) 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.
