Stocks

Rocket Companies (RKT) should be on your watchlist

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Rocket Companies (RKT) is fundamentally a very solid corporation for a variety of reasons (strap in). Quicken Loans/Rocket Mortgage is by far the largest non-bank retail lender in the US, more than twice as large as the second largest (United Shore Financial). Non-bank lenders can provide more flexible loans with smaller down payment percentages than banks.

While size is not necessarily better, long-term sustainability and market share retention/growth should be determined by a company’s consumers and staff. Rocket Mortgage has been recognized JD Power’s #1 in the United States for Client Satisfaction in Mortgage Origination for 11 years in a row, with a 91 percent customer retention rate and a ranking of 194 on the most recent Fortune 500 list. Rocket is ranked #5 on Fortune’s list of the 100 Best Companies to Work For. They also provide staff discounts on mortgages, which is a fantastic benefit.

The company is quite robust financially. $RKT brings a portfolio of offerings that give it huge competitive advantages, as well as a seemingly healthy balance sheet with increasing operating margins during a time where home ownership is at an all-time high (and average home prices have appreciated 3% YoY). Dan Gilbert, Rocket’s cofounder and chairman, still owns 75%+ of the company, despite starting the company in 1985. He recently became the 36 th richest person in the world after Rocket’s IPO. 

The company is focusing on growing its other revenue streams, building out its platforms, and grabbing more market share in an industry where it’s already dominating. There are plenty of press releases and news articles out about Rocket which is also a positive in my eyes, as I value transparency. I also like that they are a company that advertises a lot and has key partnerships and sponsorships as this further builds brand reputation. Switching gears to the actual RKT stock itself and valuation.

There are a myriad of reasons the stock is where it’s at today which I’ll try to touch on, but in the last week I finally “got” it looking at the price action and putting the pieces together. It’s here that I’ll say I’m torn on the cost/benefit of RKT being a “meme” stock as it can lead to overselling/shorts piling on which we’ve seen, but during current shifting bullish market conditions back towards small cap growth I do see this as a benefit. Again this is where brand reputation/name recognition helps immensely as it already has huge retail interest.

In my opinion, choosing to keep RKT structured as-is has proven beneficial as Gilbert and management have kept ~70% of the voting rights because they believe they know how to steer the company best. So far this has worked quite well for them, as you don’t become the 36 th richest person in the world with an industry-leading company without steering through some tough waters.