Haven’t done one of these in a while, but this stock has been calling to me

Clover Health is a technology company currently operating as a Medicare Advantage insurance provider. I say it’s a technology company and not an insurance company, bc what makes Clover different and what will propel it forward is it’s technology, which has more applications than just Medicare Advantage plans.

quote:
Clover Health operates as a next-generation Medicare Advantage insurer, which leverages Clover’s flagship software platform, the Clover Assistant, to provide America’s seniors with highly affordable, “obvious” healthcare plans. By empowering physicians with data-driven, personalized insights at the point of care through the Clover Assistant platform, Clover strives to improve clinical decision-making and outcomes.

- from their investor website

The Clover Assistant is the piece of technology we’re particularly interested in, and it has broad health insurance applications, but it’s only being applied in Medicare Advantage right now. It’s a data collection and analytics tool to improve patient outcomes when used by providers, which is a big selling point in itself, but it’s also more economically efficient bc it provides better outcomes. It also sources data within its own network on patient outcomes to continue to improve its own recommendations to doctors. The President of Clover also believes the Assistant is a first step towards individualized medicine and that Clover could lead the way in that regard.

Clover is also rapidly branching into new areas. They just launched Medicare Direct Contracting, which is a much more lucrative plan as a Medicare provider, and received exclusive rights to be a direct contractor in 10 states (1 company/state).

The valuation - this company is currently extremely undervalued. At a market cap of 3.2B and projected 2021 revenue of $820M, the company is trading at 4x sales. The company is also experiencing massive growth, and their price/sales does not reflect that or compare to other industry peers. This company released from its SPAC at $16 share price and is trading at just below $8 right now

Clover has been targeted by short sellers after Hindenburg released a short report saying that Clover failed to tell investors about a DOJ inquiry. The SEC then opened an investigation. Since that time, Clover has disclosed that this was a normal DOJ inquiry into Medicare providers, and Clover received the direct contracting state contracts following this. The DOJ would not allow Clover to receive the new government contracts if it was not in compliance. The SEC investigation is still ongoing, which is holding down the price to an extent. Additionally, Hindenburg states that Clover oversold its direct contracting when it SPAC’d, but this has also been dismissed as Hindenburg took language out of context to use as firepower.

Potential catalysts for the stock are impending closure of the SEC investigation, high growth earnings projected, growth numbers from release of direct contracting, and a potential short squeeze (below).

Final DD - Clover is heavily shorted (40-50% legitimate short interest) and has previously been targeted by Reddit. I believe Reddit will target Clover again for another attempt at a short squeeze, now flexing its muscle with the additional gains from AMC. There have been a number of bullish options purchases recently, and the chart suggests its close to a breakout. One interesting note is the company allowed Reddit to submit questions for its previous earnings call and actively highlighted that Reddit asked the questions.

Potential risks with the stock: the company could oversell its growth numbers; the company could be found at fault in the SEC investigation; short sellers could continue to control the stock as long as the investigation is ongoing. The company has oversold its growth numbers in the past, however they clearly atoned for that and undersold their growth numbers for the previous quarter, resulting in a big earnings beat. The SEC investigation seems unlikely to result in anything at fault, as the DOJ has found no issues from its inquiry, which Clover says was a standard inquiry into Medicare providers. The most likely con is that we don’t know when the SEC will end it’s investigation and release the results and Hindenburg and other short sellers will still have pull til then.

I believe it is close to a breakout and could be a big gainer very soon. This is not a play on momentum in a breakout, but a play to get in on the ground floor of the breakout right before a significant move. This company reminds me closely of GME and BB in that it’s a value play in itself but also has a change of business model and a short squeeze/retail momentum play all in combination

TLDR: buy CLOV