A WallStreetBets Alternative to Clover Health

The most recent 30-day data from Quiver Quantitative on the most commented r/WallStreetBets stocks put Clover Health (NASDAQ:CLOV) in the top spot. That doesn’t make CLOV stock a buy at this point.


A digital illustration of a stethoscope attached to a smartphone.
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However, it does point out something helpful you might expect from the Oracle of Omaha himself and not the Reddit express. 

Here’s why. 

Move Over CLOV Stock

According to the data at noon on July 22, CLOV had 9,829 mentions on the subreddit. The next closest stocks were AMC Entertainment (NYSE:AMC) and ContextLogic (NASDAQ:WISH) at around 7,200. They’re not even close.

Of the 11 stocks listed in the data for the past 30 days, I’m either on the fence or bullish about more than half the names. That’s not to say I’d buy all 11 if I had some cash lying around, but I’m not nearly as offended by these names as I thought I would be. 

Maybe these Reddit investors have more on the ball than I previously thought. In fact, when you consider that the investment with the most comments is the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) at almost 14,000, it’s fair to say these retail investors know deep down that the index is the wiser long-term buy. 

Warren Buffett said so at the 2020 Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) annual meeting. 

“[F]or most people, the best thing to do is to own the S&P 500 index fund,” Buffett stated in May 2020.

Someday, maybe Clover Health will become an index constituent. In the meantime, the regularity of SPY comments by Redditors suggests these so-called rogue investors understand the markets and finance more than we care to admit. 

At the very least, it does suggest that if you’re going to buy risky or speculative stocks that are losing money, you might want to diversify your holdings by adding a big chunk of SPY to your portfolio. 

Other ETF Alternatives

Another possibility for those hell-bent on betting on Clover Health is to buy three different securities in one-third portions. 

The first portion (33.33%) would be SPY itself. Over the long haul, you can’t go wrong with this broader index play. 

The second buy is to put one-third into the Defiance Next Gen SPAC Derived ETF (NYSEARCA:SPAK), an ETF that invests in both pre-and-post special purpose acquisition companies (SPACs). The ETF got its start in September 2020. It currently has $60.6 million in net assets. The SPAC cool-off hasn’t helped its asset gathering.       

At present, SPAK has 298 holdings. No, CLOV is not one of 10 top holdings. CLOV is the 5oth largest position at a weighting of 0.40%. Buying SPAK gives you access to the SPAC industry. Eventually, regulations will catch up. When they do, look for SPAC deals to ramp up once more.

Lastly, you put one-third of your overall bet in CLOV itself. So, even if Clover Health were to go to $0, the loss wouldn’t be nearly as significant as it would with 100% of your hard-earned investment dollars going down the drain.

The Bottom Line

InvestorPlace’s Muslim Farooque recently discussed how the Clover Assistant Platform wasn’t nearly as impressive as its $3.6-billion valuation would suggest. With only 2,400 healthcare providers using the platform, Farooque believes many providers already have their own data analytics platforms and software technology to lower costs for their patients. 

Translation: Clover Health is a solution in search of a problem. 

If you must buy Clover Health stock — billionaire real estate investor Barry Sternlicht essentially called CLOV stock a fraud — at least have the good sense to do so alongside some other bets that help lower your risk profile.

After all, through July 22, SPY is up 18.1% year-to-date. That’s better than 270 (53%) of the SPY’s 505 constituents. 

I wouldn’t buy CLOV stock at any price. However, if you must own it and don’t want to hedge your bets, at least try to buy it a dollar or two below where it’s currently trading for margin of safety purposes.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2021/07/a-wallstreetbets-alternative-to-clover-health-and-clov-stock/.

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