Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT).
Is Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) the right investment to pursue these days? Money managers are getting more bullish. The number of bullish hedge fund bets improved by 7 lately. Our calculations also showed that RCKT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). RCKT was in 21 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 14 hedge funds in our database with RCKT positions at the end of the previous quarter.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
James E. Flynn of Deerfield Management
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the “next Amazon” in this video; again we are listening. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the new hedge fund action regarding Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT).
What have hedge funds been doing with Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT)?
At Q4’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in RCKT a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) was held by Tang Capital Management, which reported holding $67.5 million worth of stock at the end of September. It was followed by Perceptive Advisors with a $51 million position. Other investors bullish on the company included Deerfield Management, Cormorant Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Tang Capital Management allocated the biggest weight to Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), around 8.06% of its 13F portfolio. Ghost Tree Capital is also relatively very bullish on the stock, designating 3.01 percent of its 13F equity portfolio to RCKT.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, created the most outsized position in Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT). Healthcor Management LP had $8.8 million invested in the company at the end of the quarter. Farallon Capital also made a $8.1 million investment in the stock during the quarter. The following funds were also among the new RCKT investors: Arsani William’s Logos Capital, Efrem Kamen’s Pura Vida Investments, and Mark Hart III’s Corriente Advisors.
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 FB Financial Corporation (NYSE:FBK), NOW Inc (NYSE:DNOW), Enanta Pharmaceuticals Inc (NASDAQ:ENTA), and Constellation Pharmaceuticals, Inc. (NASDAQ:CNST). This group of stocks’ market values are similar to RCKT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FBK | 5 | 80718 | -2 |
| DNOW | 21 | 106408 | 6 |
| ENTA | 21 | 242457 | 4 |
| CNST | 27 | 584990 | 19 |
| Average | 18.5 | 253643 | 6.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $254 million. That figure was $304 million in RCKT’s case. Constellation Pharmaceuticals, Inc. (NASDAQ:CNST) is the most popular stock in this table. On the other hand FB Financial Corporation (NYSE:FBK) is the least popular one with only 5 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately RCKT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on RCKT were disappointed as the stock returned -35.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
