Should I Avoid Rocket Pharmaceuticals, Inc. (RCKT)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) changed recently.

Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) has seen a decrease in support from the world’s most elite money managers in recent months. Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) was in 22 hedge funds’ portfolios at the end of March. The all time high for this statistic is 33. Our calculations also showed that RCKT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

At the moment there are tons of tools shareholders employ to value stocks. A duo of the best tools are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outperform their index-focused peers by a very impressive margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Peter Kolchinsky of RA Capital Management

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 we’re going to take a gander at the recent hedge fund action surrounding Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT).

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

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in RCKT over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Perceptive Advisors held the most valuable stake in Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), which was worth $127.2 million at the end of the fourth quarter. On the second spot was Tang Capital Management which amassed $112.3 million worth of shares. RA Capital Management, Cormorant Asset Management, and Great Point 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 Tang Capital Management allocated the biggest weight to Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), around 31.61% of its 13F portfolio. Great Point Partners is also relatively very bullish on the stock, designating 6.97 percent of its 13F equity portfolio to RCKT.

Judging by the fact that Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) has experienced declining sentiment from hedge fund managers, logic holds that there was a specific group of fund managers who were dropping their entire stakes by the end of the first quarter. At the top of the heap, Albert Cha and Frank Kung’s Vivo Capital dumped the biggest stake of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $17 million in stock. Alan Frazier’s fund, Frazier Healthcare Partners, also dumped its stock, about $9.2 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 11 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT). We will take a look at Matador Resources Co (NYSE:MTDR), Clean Energy Fuels Corp (NASDAQ:CLNE), Veoneer, Inc. (NYSE:VNE), Noah Holdings Limited (NYSE:NOAH), Badger Meter, Inc. (NYSE:BMI), Maxar Technologies Inc (NYSE:MAXR), and Coca-Cola Consolidated Inc. (NASDAQ:COKE). This group of stocks’ market caps resemble RCKT’s market cap.

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As you can see these stocks had an average of 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $226 million. That figure was $568 million in RCKT’s case. Maxar Technologies Inc (NYSE:MAXR) is the most popular stock in this table. On the other hand Noah Holdings Limited (NYSE:NOAH) is the least popular one with only 12 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 64. 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 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 beat the market again by 7.7 percentage points. Unfortunately RCKT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RCKT were disappointed as the stock returned -1.1% 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 many of these stocks already outperformed the market since 2019.

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