The WallStreetBets forum on the Reddit Inc. website on a laptop computer and logo on a smartphone arranged in Hastings-On-Hudson, New York, USA, Friday, January 29, 2021.
Tiffany Hagler-Geard | Bloomberg | Getty Images
The shares of the rocket companies gathered more than 20% on Tuesday in a surprising move, with no apparent new news. Currently, the online mortgage provider has large short bets placed against it through hedge funds and seems to have won a growing interest from day traders on Reddit’s famous WallStreetBets.
Nearly 40% of its available shares are sold short and it is close to the top of the list of US companies in terms of the size of the short bet made by hedge funds, according to FactSet. This makes it a classic target for meme-obsessed investors, who have stormed together this year in shares and options of short-circuiting companies to eliminate short sellers. At present, the size of the retail interest in Rocket was unclear.
Tuesday’s jump put Rocket on the path to the best day since it went public in August 2020.
A number of popular posts from the WallStreetBet chat room featured Rocket on Tuesday. One says, “I like RKT. $ 1.7 million all-in, let’s go YOLO ”and quickly attracted over 1,700 comments.
“It’s 38% short … When people see that, they think you can throw the sellers out,” CNBC’s Jim Cramer told Squawk on the Street, adding that he likes management funds. and Business of Rocket Companies.
“I was a big fan of [CEO] Jay Farner and [Chairman] Dan Gilbert .. and, honestly, I don’t understand why the actions didn’t react to what was very good in that they practically exposed a story that just said: “We can show how, when rates go up, it didn’t affect our business . When rates go down, it doesn’t affect our business. “
The rise of Rocket could be a sign that the mania for retail seen in GameStop earlier this year is still a factor. A month ago, an army of retail investors on Reddit managed to raise the video game retailer by 1,500% in two weeks, causing huge pain for the short sale of hedge funds. The wider market has also had the opposite impact due to the frenzy, as many large investors have taken risks in general.
When a high short-term stock rises sharply, it could force short sellers to cover their bearish positions to limit their losses. Short coverage tends to fuel the action rally further.
Rocket reported stronger-than-expected gains in the fourth quarter on Thursday, which impressed some Wall Street analysts. Wells Fargo slightly raised its price target and increased its earnings estimate for Rocket, following its high pace.
“We were impressed by earnings in the fourth quarter, especially by direct resistance to retail GOS retail margins,” Wells analyst Donald Fandetti said in a note Monday. “RKT appears to be well positioned to take market share if the environment becomes more dislocated by higher rates.”
– CNBC’s Kevin Stankiewicz contributed to the reporting.
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