Rocket Companies Inc. (RKT) — formerly Quicken Loans — is under steady accumulation by CEO Jay Farmer and other directors and officers, observes Bryan Perry, editor of the specialized advisory service, Micro-Cap Stock Trader.
Rocket is the largest mortgage lender in the United States, having underwritten $342 billion in mortgages so far in 2022. Shares of Rocket have been crushed as the Fed has aggressively raised interest rates, which have translated into the average 30-year mortgage now being quoted at 6.67% on a national basis. New home and existing home sales have been pressured as a result of the Fed orchestrating a policy designed to bring housing prices down.
Revenue for Rocket is forecast to decline by 31% in 2023 to $4.2 billion and fully explains why the stock has tumbled from its all-time high of $43; the stock bottomed out at $6 in November, 2022, and with the first signs of the Fed looking to moderate the pace of future rate hikes by the end of the first quarter, it and other mortgage-related stocks should catch a bullish bid that leads to outperformance in 2023.
But back to the business of insider activity, CEO Jay Farner has purchased a total of $10.38 million since mid-September of $10.38 million — and that’s just in the past two and a half months.
As of November 25, 2022, Jay Farner owns 5,778,507 shares of RKT with a value of $45 million. When I see this kind of aggressive accumulation in a stock by its CEO, he is exhibiting an extremely high level of confidence in the company’s business model.
The market cap of Rocket Companies is about $941 million, which is more than the typical micro-cap stock, but I wanted to have a pure play on a Fed pivot in a stock that could easily double or triple when the market turns bullish on the sector. And quite frankly, bullish sentiment is just now showing up with the recent price action in shares of RKT.
The stock was trading at $16 a year ago when the Fed began to tighten. Being we are nearing the end tightening cycle; the market will anticipate mortgage rates coming down and home buying and selling activity picking back up.
Investors should get in front of this transition, follow the lead of a CEO who is buying his company’s stock hand over fist and look for a powerful rebound in the share price in the months ahead.