Shares of the medical insurance company Clover Health (Nasdaq: CLOV) 8 June increased by eighty-six percent, with 11,92 to 22,15 $, and for the past 5 days - on 184%. The daily trading volume in securities increased by 33 Times, with 22 million shares to 720 million. The prerequisite for this growth may have been the users of the Reddit forum.: Clover Health was the most mentioned company on the forum on Tuesday.
Short float — 43,5 %
Reddit users often choose stocks of complex companies with a significant number of small positions as their own target.. According to S3 Partners, 43,5 % Clover Health shares sell short. It is much more, than the average US organization - five percent - or even AMC - eighteen percent. If the value of a stock with a huge size of small positions starts to rise sharply, then the players on the decline, to reduce losses, close their positions and buy back shares from a broker. This further accelerates the price of securities..
Reddit bidders urge each other to take advantage of Clover Health shares. “This looks like a great opportunity for a short squeeze. I don't see the circumstances, for which Clover Health shares will not be able to rise to the level of AMC last week - over 70 $ or even higher, - reported in one of the well-known messages.
In May, Clover Health papers cost 6,9 $ - fifty-six percent cheaper, than the beginning of the year. Stocks began to fall early in February, when Hindenburg Research said about the US Department of Justice investigation into the company. The object of the investigation was the business model of Clover Health and its Clover Assistant software product.. The next day, the company admitted that, that received requests from the department. After the Hindenburg Research report, the US Securities and Exchange Commission began its investigation (SEC).
Recently listed on the Clover Health exchange, teaming up with SPAC. Clover has growing revenue and a good balance sheet, but the company remains unprofitable: in the first quarter 2021 operating loss increased from 26,6 to 119,1 million dollars. Analysts are waiting, what next 12 months, Clover shares will fall to 9,3 $.
Clover Health Financial Results in the First Quarter, million dollars
| 2020 | 2021 | |
|---|---|---|
| Revenue | 165,5 | 200,3 |
| Operating loss | 26,6 | 119,1 |
| Net loss | 28,2 | 48,4 |
Professional advice
Recently, the so-called meme actions are causing more and more excitement.. Clover Health shares gained in a month 168%, AMC — 465%, and GameStop — 109%. High profitability means high risk, so Joe Keenahan, chief strategist at TD Ameritrade, gave investors a few simple, but good advice:
- Investment horizon. According to Kinahan, the first thing an investor should ask himself is: "What's my plan?» Short-term speculation is very different from investing for a year or two. One of the common mistakes investors make is to select companies for speculation and long-term investments according to the same rules..
- Portfolio according to needs. Traders, who enjoy short-term deals, Kinahan advises to allocate no more than 5-10% of the deposit for speculation. "Invest in companies, whose business you understand and who, maybe, pay dividends ", - added specialist.
- Timely exit. Every investor must determine the moment in advance, when he closes his position: “You can get out of the position completely or partially - this is not an all-or-nothing game”.
