Rocket Corporations, a significant quick hedge fund goal, jumps greater than 70%

Rocket Companies stocks rose more than 70% on Tuesday, which was surprising as there was no new news. The online mortgage lender currently has big short bets from hedge funds and appears to have drawn bullish interest from day traders on Reddit’s infamous WallStreetBets.

Nearly 40% of available stocks are being sold short, and according to FactSet, it’s high on US companies ‘list for the size of hedge funds’ short bets. That makes it a classic target for meme-obsessed investors who jointly stormed into stocks and call options of sharply shortened companies this year in an attempt to stamp out short sellers. At the time, the size of retail interest in Rocket was unclear.

Rocket closed on Tuesday 71.19% higher at $ 41.60 apiece, the best day since going public in August 2020. Trading was temporarily suspended due to multiple volatility throughout the day.

Rocket was featured in a number of popular posts on the WallStreetBet chat room on Tuesday. One says, “I like RKT. $ 1.7 million all in, let’s go YOLO,” and it quickly got over 1,700 comments.

“We believe trading is a reflection of retail / Reddit activity as we’ve seen recently in other stocks,” Wells Fargo analyst Donald Fandetti wrote on Tuesday. “We took note of our incrementally more positive view, but not enough to support this move, which is the third trading day after winning. We expect stocks to normalize and return to fundamentals, but the timing is uncertain . “

Fandetti has an equal weight rating for the stock.

Tuesday’s jump into Rocket Companies’ stocks didn’t surprise trader Jon Najarian. Najarian, a panelist on CNBC’s “Mid-Term Review” known for spotting unusual activity in the options market, said Tuesday that his interest in Rocket Companies had been piqued the day before.

“Our beta-tested social media content resumed some really bullish comments on the Reddit board WallStreetBets yesterday. These men and women are back and they are deeply connected to this,” said Najarian. Co-founder of Market Rebellion, who holds call positions in Rocket Companies and positions in GameStop.

Najarian cited an increase in rocket options trading volume after increasing mentions on Reddit.

However, it remains to be seen if there is some sort of social upturn that could keep Rocket stocks dynamic. Meme-driven chatter on Rocket was nowhere near as intense as on GameStop, according to AI company Accrete.

“It’s 38% short … when people see that, they think you can break the salespeople,” CNBC’s Jim Cramer said on Squawk on the Street, adding that he’s the management and the business Really like Rocket Companies business fundamentals.

“I was a huge fan of [CEO] Jay Farner and [Chairman] Dan Gilbert … and honestly failing to understand why the stock didn’t respond to what was very good where it basically set out a story that just said, “We can show how it didn’t harm our business if.” interest rates rise. If interest rates go down, it won’t hurt our business. ‘”

Rocket’s surge could be a sign that the retail craze seen in GameStop earlier this year is still a factor. A month ago, an army of retail investors on Reddit managed to grow its brick and mortar video game retailer 1,500% in two weeks, causing great pain to short hedge funds. The broader market also had some frenzy effects as many large investors took the risk across the board.

If a stock with high short sales rallies, it could force short sellers to cover their declining positions to limit their losses. The short cover tends to drive the stock’s rally further.

Rocket reported stronger-than-expected fourth-quarter earnings on Thursday, which impressed some Wall Street analysts. Wells Fargo raised its target price slightly and raised its earnings estimate on Rocket after its big hit.

– CNBC’s Kevin Stankiewicz contributed to the coverage.

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