Rocket Companies Inc

A small position in Rocket Companies was a slight detractor from performance. The company consists of tech-driven real estate, mortgage and financial services businesses. The balance between risk and reward in the event that mortgage rates start moving in the right direction looks attractive. The conflict in the Middle East, however, has clearly introduced a lot of uncertainty, driving up mortgage rates. While we still think housing affordability is on the political agenda, we are carefully managing the position sizing.

We initiated a position in Rocket Companies during the Second Quarter based on its transformative all-stock acquisition of Mr. Cooper. Rocket has been a persistent share gainer in the fragmented mortgage origination industry, with a 12% market share of refi originations and a 4% share of purchase originations. It has differentiated, industry-leading cost and time to originate, driven by its continuous reinvestment in technology and automation. The combination of Rocket and Mr. Cooper is viewed as a transformative, synergy-rich merger that will enable pro forma Rocket to turn ecosystem unit economics on its head, leveraging Rocket’s ~85% refi recapture rates which are already >3x the industry average.

We initiated a position in Rocket Companies during the Second Quarter based on its transformative all-stock acquisition of Mr. Cooper. Rocket has been a persistent share gainer in the fragmented mortgage origination industry, with a 12% market share of refi originations and a 4% share of purchase originations. It has differentiated, industry-leading cost and time to originate, driven by its continuous reinvestment in technology and automation. The combination of Rocket and Mr. Cooper is viewed as a transformative, synergy-rich merger that will enable pro forma Rocket to turn ecosystem unit economics on its head, leveraging Rocket’s ~85% refi recapture rates which are already >3x the industry average.

The acquisition of Redfin by Rocket Companies (RKT) for $12.50 per share in stock is a strategic move that enhances RKT's position in the market. The merger is expected to create a stronger and more profitable customer acquisition service, leveraging RKT's capabilities as a well-capitalized national mortgage player. This positions RKT favorably to benefit from a potential recovery in the housing market, making it a compelling investment opportunity.