This article will teach you how to use the 4Ms of investing. This will be a detailed walkthrough to show you how the 4Ms work and why they are important. If you are interested, you can log into Tykr to use the 4M Confidence Booster (Powered by OpenAI) which will allow you to complete a 4M Analysis in less than 60 seconds.
What are the 4Ms?
- MOS (Margin of Safety) – The MOS is the math part of investing which includes the Summary, Score, and MOS (Margin of Safety).
- Meaning – The meaning is the business model and how scalable the revenue streams are.
- Moat – The moat is how the business compares to other companies in the same Sector and Industry.
- Management – The management is the track record of the CEO.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
Table of Contents
The following links will direct you to key topics to help answer the question, is Rocket Companies (RKT) stock a good buy?
- Rocket Companies Company History
- MOS
- Meaning
- Moat
- Management
- 4M Score
- Is Rocket Companies (RKT) stock a good buy?
1. Rocket Companies Company History
When investing in stocks, it’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition.
- Founded: 1985 by Dan Gilbert as Rock Financial in Detroit, Michigan
- Inspiration: Aimed to revolutionize the mortgage lending industry
- Launch: Rebranded as Quicken Loans in 1999, then transitioned to Rocket Mortgage in 2015
- Growth: Pioneered online mortgage lending with a focus on digital innovation and customer service
- Milestone: Went public in 2020, listed on NYSE under RKT
- Innovations: Introduced the first fully online mortgage process, enabling customers to get mortgage approvals in minutes
- Acquisitions: Acquired several companies to expand services, including ForSaleByOwner.com and Core Digital Media
- Rebranding: Launched Rocket Companies as a holding entity for its various financial services, including Rocket Mortgage, Rocket Auto, and Rocket Homes
- Current Reach: Largest mortgage lender in the U.S., with a significant share of the home loan market
- Impact: Transformed the mortgage industry by making home financing faster, easier, and more accessible through technology
2. MOS (Margin of Safety)
When investing in a company, the first step is to look at the financials. Fortunately, Tykr does this for us automatically. The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make.
- Summary: overpriced
- Score: 33/100
- MOS: 1%
To see the most up-to-date Summary, Score, and MOS, please log into Tykr.
3. Meaning
When investing in a company, it’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
Here is how Rocket Companies (RKT) makes money:
- Mortgage Origination: Generates revenue from originating home loans through its primary brand, Rocket Mortgage.
- Loan Servicing: Earns income from servicing mortgage loans, including collecting payments and managing escrow accounts.
- Title Services: Provides title insurance and settlement services, earning fees from real estate transactions.
- Real Estate Services: Offers brokerage services through Rocket Homes, earning commissions on home sales.
- Insurance Services: Sells homeowners and auto insurance policies through Rocket Insurance, earning premiums.
- Technology Services: Provides technology solutions to streamline the mortgage process for banks and lenders, charging licensing fees.
- Advertising and Marketing: Generates revenue from advertising and marketing partnerships with real estate agents, builders, and other industry players.
- Investment Income: Earns income from investing in mortgage-backed securities and other financial instruments.
Rocket Companies uses these various streams to maximize their earnings and provide diverse services to moviegoers.
Here are a few of the other companies that Rocket Companies has acquired over the years. This is important because a company will use a “Buy before build” philosophy to go to market faster and add additional streams of revenue. A company with more revenue streams has a more stable business model. Keep in mind, that most companies don’t build new software because it takes too long to go to market and generate revenue.
4. Moat
When investing in a company, it’s important to understand how a company ranks against other companies in the same sector and industry. Based on the Score, here is how Rocket Companies (RKT) stacks up against other companies.
- Greystone Housing Impact Investors LP.(GHI) – 61
- Velocity Financial, Inc.(VEL) – 61
- CNFinance Holdings Limited.(CNF) – 45
- loanDepot, Inc.(LDI) – 39
- Rocket Companies, Inc.(RKT) – 33
- Guild Holdings Company.(GHLD) – 33
To see the most up-to-date Summary, Score, and MOS and each stock, please log into Tykr.
5. Management
When investing in a company, it’s important to understand who the CEO is, what they have accomplished in the past, and how they have helped this company grow. Good leaders typically have stronger cultures, less turnover, and better returns in the stock market.
- Operational Excellence: Varun Krishna Spearheaded initiatives to streamline operations and improve efficiency across Rocket Companies’ business units.
- Technology Integration: Led efforts to enhance technological capabilities, including digital mortgage processes and customer-facing platforms.
- Strategic Partnerships: Fostered partnerships that expanded Rocket Companies’ market reach and service offerings.
- Customer Experience: Implemented initiatives to enhance the overall customer experience, from mortgage application to servicing.
- Employee Engagement: Implemented programs to boost employee morale and productivity, contributing to a positive work culture.
Varun Krishna’s leadership as COO at Rocket Companies has been pivotal in driving operational efficiency, technological innovation, and customer-centric strategies, positioning the company as a leader in the mortgage and real estate services industry.
6. 4M Score
All of our homework on this company leads up to the 4M Score. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the Meaning, Moat, and Management. If all 4Ms pass, we should have high confidence in buying this stock.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
👉 The 4M Score of Rocket Companies (RKT) is 41/100.
To see the most up-to-date 4M Score, please log into Tykr.
7. Is Rocket Companies (RKT) stock a good buy?
Some of the top questions investors can have is Rocket Companies (RKT) stock a good buy or should I buy Rocket Companies (RKT) stock?
Rocket Companies (RKT) presents an appealing investment in the mortgage and real estate services sector. As the top retail mortgage lender in the U.S., Rocket Mortgage leads with its groundbreaking digital application process. Its integrated platform, encompassing loan origination, servicing, and real estate brokerage through Rocket Homes, offers a comprehensive solution for buyers and homeowners. The company’s robust financial performance, driven by high mortgage volumes and technological efficiency, adds to its investment attractiveness. However, investors should be aware of risks such as interest rate changes and market competition. Overall, Rocket Companies’ industry leadership, innovative technology, and diverse services make it a strong investment candidate in the mortgage and real estate sector.
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To truly know if Rocket Companies (RKT) is a good stock to buy or sell, we recommend you log into Tykr. Within seconds you can see the Summary, Score, MOS, and 4M Score.
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