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Rocket Firms, a serious brief hedge fund goal, shares up greater than 20%

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The WallStreetBets forum on the Reddit Inc. website on a laptop and the logo on a smartphone were arranged in Hastings-On-Hudson, New York, USA on Friday, January 29, 2021.

Tiffany Hagler-Geard | Bloomberg | Getty Images

Rocket Companies stocks rose more than 20% on Tuesday, surprisingly due to no obvious 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 this year stormed into stocks and call options of companies with strong short-selling rates to drive out short sellers. At the time, the size of retail interest in Rocket was unclear.

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.

“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.

“We were impressed with the fourth quarter results, particularly the resilience of GOS margins in direct retail,” said Donald Fandetti, Wells analyst, in a note. “RKT appears to be well positioned to gain market share when the environment is more affected by higher rates.”

– CNBC’s Kevin Stankiewicz contributed to the coverage.

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Katherine Clark