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Clover Health Is Down Big. Is It a Buy?

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After a short-seller report, the Medicare company has taken a hit. Is it worth a closer look?

Chamath Palihapitiya has taken three companies public through his special-purpose acquisition companies (SPACs) and has announced a fourth in recent months. Since their merger announcements, all are handily outperforming the market but one -- Clover Health (CLOV 2.21%). In this Fool Live video clip, recorded on March 15, contributors Matt Frankel, CFP, Brian Withers, and Dan Caplinger discuss why Clover Health has performed so poorly and whether the stock is worth a look for long-term investors now.

Matt Frankel: This is the one that everyone's been asking. At least, when Dan and I do SPAC shows, half of the questions are about Clover Health in the chat. It's fun that we're going to talk about Clover Health. They're a Medicare Advantage company, but they're also primarily a technology company. They have something called Clover Assistant that really aims to make the Medicare process better, and optimize the claims, and physician relationships and things like that. The stock is down 40% year-to-date, which a lot of investors are undeniably not too happy about. There was a big short seller report that I'm sure, either Dan or Brian can weigh in on. Clover Health, the business itself is doing pretty well. The revenue grew 46% in 2020. They're losing money, but with growth like that, they're not that concerned. They were the third IPO. Their ticker symbol is C-L-O-V and this was formerly I-P-O-C when it was in SPAC form. What do you guys think about Clover Health?

Brian Withers: Go ahead, Dan.

Dan Caplinger: Brian, you want to go?

Withers: No, go.

Caplinger: I had a chance to talk with CEO, Vivek Garipalli, when this was first getting announced. He would tell you that this business is highly misunderstood. Like you were saying Matt, a lot of people just look at this as an insurance company. When the deal was announced, pretty unusual, the SPAC had kind of run up, and then the SPAC actually pulled back when the announcement was made. I think a lot of people were hoping that Chamath would pick a different tech company versus something with this sort of healthcare angle to it. The short selling report is focused on uncertainty about the past experience that Garipalli has. But he's a healthcare professional, he's done healthcare stuff for a long time, he knows how the business works. I think you're going to see this evolve over time to be a different looking business than what a lot of people see at first sight.

Withers: Yeah, I absolutely like their approach. Electronic health records, plus insurance company, plus AI and machine learning tools to help doctors. It gets better and better with more and more data and more and more patients. The runway is huge. I like their focus on Medicare and older humans who have multiple kind of situations, and they have to see multiple physicians and specialists to get things done. I like that it's got revenue.

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Clover Health Investments, Corp. Stock Quote
Clover Health Investments, Corp.
$2.78 (2.21%) $0.06

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