#7 - Rocket Companies (NYSE:RKT)
The last company on this list is Rocket Companies (NYSE:RKT). This is the parent company of Rocket Mortgage which was a disruptive presence in the mortgage lending industry. The company went public via a SPAC in 2020, but as of this writing, RKT stock is nearly flat for 2021.
One reason is competition. The company is a leader in the online mortgage space, but the moat is shrinking. However, there are more immediate threats. For starters, according to the National Association of Realtors, existing-home sales fell 2.7% in April. Investors have to wonder if this is the beginning or the end of the urban flight that occurred during the pandemic.
The potential for rising interest rates also has to be a concern. And even more worrisome, and perhaps more likely, is the possibility that the Federal Reserve could pare back its purchasing of mortgage-backed securities. That could send mortgage rates significantly higher which would be a further crimp on new home buying and refinancing.
But this is a presentation about the long term. The housing market is notoriously cyclical but Rocket Companies has the balance sheet that will allow it to have staying power.
About Rocket Companies
Rocket Companies, Inc, a fintech holding company, provides mortgage lending, title and settlement services, and other financial technology services in the United States and Canada. It operates through two segments, Direct to Consumer and Partner Network. The company's solutions include Rocket Mortgage, a mortgage lender; Amrock that provides title insurance, property valuation, and settlement services; Rocket Homes, a home search platform and real estate agent referral network, which offers technology-enabled services to support the home buying and selling experience; and Rocket Loans, an online-based personal loans business.
Read More - Current Price
- $11.82
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 6 Hold Ratings, 6 Sell Ratings.
- Consensus Price Target
- $13.92 (17.7% Upside)
So did the Reddit crowd get it right with these stocks, or did they just get lucky? In the end, it really doesn’t matter. The takeaway from this presentation is that speculative investments can be profitable.
However, the advice to “know what you own” is critical if you’re thinking about dabbling in these risk/reward stocks. The seven stocks in this presentation provide an educated guess about companies that have a sustainable business model.
Does this mean that any of these companies are sure things? Of course not. Many of these companies have not been trading publicly for very long. And to enter the market at the end of a year which has no historical comparison from a stock market standpoint is the reason for caution.
But if you have an appetite for risk and some “blow money” to invest, these stocks could deliver a fun and profitable ride even as the meme stock trade may wind down.
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