We recently compiled a list of the 10 Hot Penny Stocks On the Move. In this article, we are going to take a look at where Clover Health Investments, Corp. (NASDAQ:CLOV) stands against the other hot penny stocks.
Interest Rate Cuts and The Stock Market
The economy of the United States has stabilized, the risks of a recession have been delayed, and inflation continues to cool down. On August 30, Reuters reported that the Federal Reserve received a fresh confirmation regarding inflation continuing to ease. The personal consumption expenditure price index rose 2.5% year-over-year in July and inflation has stayed within the 2% goal set by the Fed. Fed Chairman has indicated that the “time has come to cut rates”.
Moreover, in another report by Reuters on the same day there were reports of the US dollar gaining as another key inflation measure fell in line with the forecasts. The Fed is expected to cut rates by 25 basis points this month. Moving forward markets have forecasted 100 bps of cuts by the end of 2024.
The stock market is already riding the tide of expected interest rate cuts. On August 20, CNBC reported that the stock market was climbing yet again, putting the S&P 500 and NASDAQ on track for their eighth positive session in a row, marking their longest winning streak this year.
Nick Colas, DataTrek Research co-founder in a CNBC interview indicated a few more positive points for even more upside for the stock market. He expressed that he feels positive about the market and the slight shuffle that caused some volatility a few weeks ago is now over. He sees the market getting back to July levels.
Colas also pointed out that the small caps and cyclicals lead the market. We have covered Chris Retzler, Needham’s small-cap growth portfolio manager’s bull case for small caps in 10 Best Penny Stocks To Buy According to the Media. Here’s an excerpt from the piece:
“On July 17, Chris Retzler, Needham’s small-cap growth portfolio manager, appeared on CNBC where he expressed optimism for the small-cap companies and suggested that we are in a cycle that will be good for many small-cap companies. The Russell 2000 index jumped 3.5% higher on July 16, hitting the highest levels since January 2022, and was up more than 10% in the previous week. This was one of the biggest rallies investors have seen in the past 4 years.
Retzler believes that small-cap stocks have been waiting for a drop in inflation and interest rate cuts. With inflation easing, interest rates are expected to go down as well. He also sees the market broadening, with small companies that have underperformed benefiting from a drop in inflation.”
Similar to Retzler, Colas is also vouching for small caps to continue outperforming the market. He believes that the market has high expectations from the Fed and the current upside is a result of the news. Moreover, he also mentioned that the stock market tends to react both before and after the cuts have been made and believes that the same pattern of growth will follow if not more after the rate cut.
Our Methodology
To compile the list of 10 hot penny stocks on the move we used the Finviz stock screener. We set the price filter to under $5, current and average stock volume to over 750,000 and the performance filter to positive 30% during the last month. Using these filters we were able to accumulate a list of hot penny stocks on the move. Next we ranked these stocks based on their one month performance, as of August 30 2024. We have also added number of hedge funds that held the stock in Q2 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An older Medicare-eligible consumer smiling happily while receiving healthcare services at a clinic.
Clover Health Investments, Corp. (NASDAQ:CLOV)
Share Price as of August 30: $2.82
Current Volume as of August 30: 7.7 million
Number of Hedge Fund Holders: 9
1-Month Performance as of August 30: 59.32%
Clover Health Investments, Corp. (NASDAQ:CLOV) is a healthcare insurance company that provides Medicare Advantage insurance plans to beneficiaries in multiple states in the US. It also runs a proprietary software platform called the Clover Assistant that helps improve healthcare outcomes and reduces costs.
Two main business segments of the company include Insurance and Non-Insurance services. The Insurance segment provides Preferred Provider Organization (PPO) and Health Maintenance Organization (HMO) Medicare Advantage plans in 11 states.
Its Non-Insurance services segment includes the Clover Assistant platform that helps doctors detect and manage chronic diseases earlier by providing personalized data-driven insights for their patients.
The company’s ability to leverage artificial intelligence and data-driven technology into its assistant platform has provided a strategic edge over the market. It is differentiated in managing the clinical outcomes and the total cost of care for people with chronic diseases.
Moreover, Clover Health Investments, Corp. (NASDAQ:CLOV) allows its customers to choose between HMO and PPO insurance, with PPO customers having the leverage to choose their doctor. The company has grown its PPO plan insurance base considerably, with 95% of the members opting for the plan.
The Medicare Advantage (MA) segment has been a key contributor to the company’s growth and its organic insurance revenue grew 11% year-over-year. The strong MA momentum marked the first year of positive net income for the company. The Q2 2024, GAAP net income was $7.2 million after improving $36.1 million year-over-year.
The adjusted EBITDA also improved by $26.3 million year-over-year and management is now aiming for a meaningful adjusted EBITDA profitability for the year. It has also positioned itself in a position to self-fund its future business growth.
CLOV was held by 9 hedge fund holders in Q2 2024, with total stakes worth $18.94 million. Renaissance Technologies is the top shareholder with a position worth $13.86 million. Moreover, the stock has gained more than 59% over the past month, which is impressive for a penny stock.
Overall CLOV ranks 7th on our list of the hottest penny stocks on the move. While we acknowledge the potential of CLOV as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.