Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT).
Is Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) a buy here? Money managers are taking a pessimistic view. The number of bullish hedge fund positions shrunk by 6 in recent months. Our calculations also showed that RCKT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). RCKT was in 15 hedge funds’ portfolios at the end of the first quarter of 2020. There were 21 hedge funds in our database with RCKT positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the recent hedge fund action regarding Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT).
How are hedge funds trading Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT)?
Heading into the second quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in RCKT a year ago. So, let’s check out 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 $41.4 million worth of stock at the end of September. It was followed by Perceptive Advisors with a $30.5 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 5.81% of its 13F portfolio. Ghost Tree Capital is also relatively very bullish on the stock, dishing out 2.41 percent of its 13F equity portfolio to RCKT.
Because Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of money managers that decided to sell off their positions entirely in the first quarter. It’s worth mentioning that Farallon Capital dropped the largest position of all the hedgies watched by Insider Monkey, worth close to $8.1 million in stock, and Efrem Kamen’s Pura Vida Investments was right behind this move, as the fund dropped about $2.5 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 6 funds in the first quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) but similarly valued. We will take a look at Livent Corporation (NYSE:LTHM), The Cheesecake Factory Incorporated (NASDAQ:CAKE), Waddell & Reed Financial, Inc. (NYSE:WDR), and Newmark Group, Inc. (NASDAQ:NMRK). All of these stocks’ market caps resemble RCKT’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $172 million in RCKT’s case. Newmark Group, Inc. (NASDAQ:NMRK) is the most popular stock in this table. On the other hand Livent Corporation (NYSE:LTHM) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) is even less popular than LTHM. Hedge funds clearly dropped the ball on RCKT as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on RCKT as the stock returned 56.6% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.