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Forget Clover Health (COLV), Buy 3 Non-Meme Healthcare Bets Instead
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Clover Health Investments, Corp. (CLOV - Free Report) once again regained attention on social-media platforms after remaining extremely volatile since the start of this month due to redittors’ activity. The stock currently has a short position of 25% of its total float. It caught the attention of the day traders who are targeting the stock for a short squeeze.
Short squeeze occurs when day traders start buying the stock, which induces losses for hedge funds that are short on stocks. On the last trading day, the company’s trading volume was almost three times the average trading volume of 52 million shares and the stock gained 9.5%
Backed by venture capitalist Chamath Palihapitiyam, Clover Health went public in a $3.7-billion SPAC (Special Purpose Acquisition Company) deal in January and since then, the share has been volatile. Since its debut in the first month of this year, the stock fell 13% through the end of May. In June so far, the stock is has jumped 79% owing to meme frenzy. The company is trading at unrealistic valuations. Its current price to sales is 149.4X compared with the industry’s average of 4.27X.
Image Source: Zacks Investment Research
In a recent sec filing, management said that the short squeeze might cause extreme price fluctuation for its shareholders and subject them to massive losses. This statement is enough for a long-term investor to understand that his meme game is not for them to play. If serious investors want to reap safe gains, it’s better to ignore the buzz and bet on fundamentally strong companies in the space, which have plenty to choose from.
Clover Health: An Emerging Company
Clover Health sells private health plans for seniors in the Medicare Advantage market via its software platform Clover Assistant.
As a company with less than $1.07 billion worth of revenues during its last completed fiscal year, the company qualifies as an “emerging growth company. It incurred losses in the last two years and is burning cash. Its business is currently concentrated by type and geography. It sells its MA plans in nine counties in NewJersey.
The company is a new entrant in the MA markets, which is a highly competitive arena. Notably, established players like UnitedHealth Inc. (UNH - Free Report) , Humana Inc., Cigna Corp., Anthem Inc. and the Aetna unit of CVS Health control most of the MA business. These companies are recognized names with longer operating histories, significantly greater financial, technical, marketing and other resources, lower labor and development costs, greater access to healthcare data and larger member bases than Clover Health.
Thus, competition with these incumbents will be a tough going for Clover Health. Moreover, the current social-media bets made the stock very unpredictable. Therefore, it’s better to stay clear of this Zacks Rank #4 (Sell) stock as there are other solid options that can be better investment bargains.
Non-Meme Healthcare Bets
We pick three stocks from the healthcare sector that have a solid Zacks Rank and a Strong Style Score. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) offer the best investment opportunities.
UnitedHealth Group is the largest entity in the health insurance realm (on the basis of market capitalization) and has built a solid health service business named Optum to diversify its revenues.
The company has a strong presence in many vertices of healthcare, such as health insurance, pharmacy benefit management, health-technology, data management and virtual healthcare. Its growing international business offers geographical diversification benefits. The company consistently keeps its costs under control, which reflects on its healthy margins.
A political support to make health insurance affordable for the Americans will directly benefit the company. Its strong balance sheet with consistent cashflows is enough to aid its growth strategies. Another attraction has been the double-digit increase in its annual dividends for the past 12 consecutive years.
Dividend payment from the company is sure to continue, given its solid business. This can fetch another gain for investors apart from share price rallies.
The Zacks Consensus Estimate for 2021 earnings has been revised 0.4% upward to $18.61 per share over the past 60 days.
Molina Health, Inc. (MOH - Free Report) primarily provides Medicaid insurance policies to the low-income group. Medicaid business generates 78% of the company’s revenues. The company has over the years built a vast Medicaid business via a number of acquisitions and expansion in new states.
The current political environment bodes well for the company’s Medicaid business. Precisely, President Joe Biden is supporting the expansion of Medicaid in those U.S states that are yet to expand Medicaid. The company’s sturdy balance sheet and a firm focus on expense management continue to build a strong enterprise.
The Zacks Consensus Estimate for 2021 earnings has moved 1.2% north to $13.34 per share over the past 30 days.
The stock carries a VGM score of B and a Zacks Rank of 2 at present.
Encompass Health Corp. (EHC - Free Report) is poised for long-term growth on its expansionary plans to open inpatient rehabilitation hospitals, which will help it cash in on the growing aging population.
It plans to open six additional hospitals in 2021 and add above 100 beds to its existing portfolio of hospitals. For 2022, the company plans to open at least 12 hospitals. Its strategy is to build six to 10 hospitals every year. Its expansionary plans will give it an edge in the highly fragmented inpatient rehabilitation industry. The company recently raised its revenue and earnings guidance for 2021.
Encompass Health’s favorable cash flow generation will boost its growth initiatives. It expects adjusted free cash flow to see a CAGR of 5-7% from 2020 to 2025.
The company’s optimistic forecast, robust cash flows and a brisk business make it a perfect stock to bet on. Its dividend was hiked from 72 cents in 2013 to the most recent annual payment of $1.12 per share, which implies 5.7% growth per annum, on average. Its low payout ratio and decent progress indicate that the company is reinvesting profits in its business. This should pave the way for payout hikes in the future.
The stock carries a VGM score of B and is currently Zacks #2 Ranked.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Image: Bigstock
Forget Clover Health (COLV), Buy 3 Non-Meme Healthcare Bets Instead
Clover Health Investments, Corp. (CLOV - Free Report) once again regained attention on social-media platforms after remaining extremely volatile since the start of this month due to redittors’ activity. The stock currently has a short position of 25% of its total float. It caught the attention of the day traders who are targeting the stock for a short squeeze.
Short squeeze occurs when day traders start buying the stock, which induces losses for hedge funds that are short on stocks. On the last trading day, the company’s trading volume was almost three times the average trading volume of 52 million shares and the stock gained 9.5%
Backed by venture capitalist Chamath Palihapitiyam, Clover Health went public in a $3.7-billion SPAC (Special Purpose Acquisition Company) deal in January and since then, the share has been volatile. Since its debut in the first month of this year, the stock fell 13% through the end of May. In June so far, the stock is has jumped 79% owing to meme frenzy. The company is trading at unrealistic valuations. Its current price to sales is 149.4X compared with the industry’s average of 4.27X.
In a recent sec filing, management said that the short squeeze might cause extreme price fluctuation for its shareholders and subject them to massive losses. This statement is enough for a long-term investor to understand that his meme game is not for them to play. If serious investors want to reap safe gains, it’s better to ignore the buzz and bet on fundamentally strong companies in the space, which have plenty to choose from.
Clover Health: An Emerging Company
Clover Health sells private health plans for seniors in the Medicare Advantage market via its software platform Clover Assistant.
As a company with less than $1.07 billion worth of revenues during its last completed fiscal year, the company qualifies as an “emerging growth company. It incurred losses in the last two years and is burning cash. Its business is currently concentrated by type and geography. It sells its MA plans in nine counties in NewJersey.
The company is a new entrant in the MA markets, which is a highly competitive arena. Notably, established players like UnitedHealth Inc. (UNH - Free Report) , Humana Inc., Cigna Corp., Anthem Inc. and the Aetna unit of CVS Health control most of the MA business. These companies are recognized names with longer operating histories, significantly greater financial, technical, marketing and other resources, lower labor and development costs, greater access to healthcare data and larger member bases than Clover Health.
Thus, competition with these incumbents will be a tough going for Clover Health. Moreover, the current social-media bets made the stock very unpredictable. Therefore, it’s better to stay clear of this Zacks Rank #4 (Sell) stock as there are other solid options that can be better investment bargains.
Non-Meme Healthcare Bets
We pick three stocks from the healthcare sector that have a solid Zacks Rank and a Strong Style Score. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) offer the best investment opportunities.
UnitedHealth Group is the largest entity in the health insurance realm (on the basis of market capitalization) and has built a solid health service business named Optum to diversify its revenues.
The company has a strong presence in many vertices of healthcare, such as health insurance, pharmacy benefit management, health-technology, data management and virtual healthcare. Its growing international business offers geographical diversification benefits. The company consistently keeps its costs under control, which reflects on its healthy margins.
A political support to make health insurance affordable for the Americans will directly benefit the company. Its strong balance sheet with consistent cashflows is enough to aid its growth strategies. Another attraction has been the double-digit increase in its annual dividends for the past 12 consecutive years.
Dividend payment from the company is sure to continue, given its solid business. This can fetch another gain for investors apart from share price rallies.
The Zacks Consensus Estimate for 2021 earnings has been revised 0.4% upward to $18.61 per share over the past 60 days.
The stock carries a VGM score of B and a Zacks Rank #2 (Buy) at present. . You can see the complete list of today’s Zacks #1 Rank stocks here.
Molina Health, Inc. (MOH - Free Report) primarily provides Medicaid insurance policies to the low-income group. Medicaid business generates 78% of the company’s revenues. The company has over the years built a vast Medicaid business via a number of acquisitions and expansion in new states.
The current political environment bodes well for the company’s Medicaid business. Precisely, President Joe Biden is supporting the expansion of Medicaid in those U.S states that are yet to expand Medicaid.
The company’s sturdy balance sheet and a firm focus on expense management continue to build a strong enterprise.
The Zacks Consensus Estimate for 2021 earnings has moved 1.2% north to $13.34 per share over the past 30 days.
The stock carries a VGM score of B and a Zacks Rank of 2 at present.
Encompass Health Corp. (EHC - Free Report) is poised for long-term growth on its expansionary plans to open inpatient rehabilitation hospitals, which will help it cash in on the growing aging population.
It plans to open six additional hospitals in 2021 and add above 100 beds to its existing portfolio of hospitals. For 2022, the company plans to open at least 12 hospitals. Its strategy is to build six to 10 hospitals every year. Its expansionary plans will give it an edge in the highly fragmented inpatient rehabilitation industry. The company recently raised its revenue and earnings guidance for 2021.
Encompass Health’s favorable cash flow generation will boost its growth initiatives. It expects adjusted free cash flow to see a CAGR of 5-7% from 2020 to 2025.
The company’s optimistic forecast, robust cash flows and a brisk business make it a perfect stock to bet on. Its dividend was hiked from 72 cents in 2013 to the most recent annual payment of $1.12 per share, which implies 5.7% growth per annum, on average. Its low payout ratio and decent progress indicate that the company is reinvesting profits in its business. This should pave the way for payout hikes in the future.
The stock carries a VGM score of B and is currently Zacks #2 Ranked.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>