We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT).
Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) was in 14 hedge funds' portfolios at the end of the second quarter of 2019. RCKT has experienced an increase in hedge fund interest recently. There were 13 hedge funds in our database with RCKT positions at the end of the previous quarter. Our calculations also showed that RCKT isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's go over the recent hedge fund action regarding Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT).
How have hedgies been trading Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT)?
At Q2's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the first quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in RCKT a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) was held by Tang Capital Management, which reported holding $44.5 million worth of stock at the end of March. It was followed by Adage Capital Management with a $32.4 million position. Other investors bullish on the company included Cormorant Asset Management, Perceptive Advisors, and Bridger Management.
Now, some big names have jumped into Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) headfirst. Vivo Capital, managed by Albert Cha and Frank Kung, created the biggest position in Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT). Vivo Capital had $11.8 million invested in the company at the end of the quarter. Behzad Aghazadeh's venBio Select Advisor also initiated a $4.3 million position during the quarter. The only other fund with a brand new RCKT position is Brad Farber's Atika Capital.
Let's now review 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 PlayAGS, Inc. (NYSE:AGS), ArcBest Corp (NASDAQ:ARCB), AdvanSix Inc. (NYSE:ASIX), and Luxfer Holdings PLC (NYSE:LXFR). All of these stocks' market caps match RCKT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AGS,12,81504,-10 ARCB,16,62849,4 ASIX,15,115979,-4 LXFR,9,106556,-5 Average,13,91722,-3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $225 million in RCKT's case. ArcBest Corp (NASDAQ:ARCB) is the most popular stock in this table. On the other hand Luxfer Holdings PLC (NYSE:LXFR) is the least popular one with only 9 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately RCKT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on RCKT were disappointed as the stock returned -22.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.