"Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum," said Clearbridge Investments in its market commentary. We aren't sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT).
Is Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) a good stock to buy now? Hedge funds are in a bearish mood. The number of long hedge fund positions retreated by 2 in recent months. Our calculations also showed that RCKT isn't among the 30 most popular stocks among hedge funds.
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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's view the key hedge fund action regarding Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT).
What does the smart money think about Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT)?
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards RCKT over the last 14 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Tang Capital Management, managed by Kevin C. Tang, holds the biggest position in Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT). Tang Capital Management has a $43.9 million position in the stock, comprising 10.1% of its 13F portfolio. The second largest stake is held by Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $30.5 million position; 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish include Bihua Chen's Cormorant Asset Management, Roberto Mignone's Bridger Management and Ken Griffin's Citadel Investment Group.
Since Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) has witnessed bearish sentiment from the smart money, logic holds that there exists a select few money managers who sold off their entire stakes heading into Q3. It's worth mentioning that Samuel Isaly's OrbiMed Advisors dumped the largest investment of the 700 funds followed by Insider Monkey, worth an estimated $19.1 million in stock. Malcolm Fairbairn's fund, Ascend Capital, also dumped its stock, about $0.8 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q3.
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. We will take a look at Exela Technologies, Inc. (NASDAQ:XELA), WideOpenWest, Inc. (NYSE:WOW), Himax Technologies, Inc. (NASDAQ:HIMX), and NextDecade Corporation (NASDAQ:NEXT). This group of stocks' market caps are similar to RCKT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XELA,13,102031,-1 WOW,13,35063,2 HIMX,9,28168,-1 NEXT,8,452258,2 Average,10.75,154380,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $154 million. That figure was $176 million in RCKT's case. Exela Technologies, Inc. (NASDAQ:XELA) is the most popular stock in this table. On the other hand NextDecade Corporation (NASDAQ:NEXT) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on RCKT, though not to the same extent, as the stock returned 20.5% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.