VSwould a small health insurer be similar to a space flight company? The founder of Social Capital, Chamath Palihapitiya, thinks so. In this Motley Fool Live video recorded on November 16, 2020, Bill Mann, director of small-cap research at The Motley Fool, explains to Palihapitiya why he thinks Health Clover (NASDAQ: CLOV) is like Galactic Virgo (NYSE: SPCE).
10 stocks we prefer over Clover Health Investments, Corp.
When investment geniuses David and Tom Gardner have stock advice, it can pay off to listen. After all, the newsletter they’ve been running for over a decade, Motley Fool Equity Advisor, has tripled the market. *
David and Tom have just revealed what they believe to be the ten best stocks for investors to buy now … and Clover Health Investments, Corp. was not one of them! That’s right – they think these 10 stocks are even better buys.
* The portfolio advisor returns to November 20, 2020
Bill Mann: Still, the day you announced the Clover Health deal, the market knocked the price of IPOC down to, I’m guessing over there, at least assuming you’re not going to waste any money. What is it about this big deal that you think the market is missing?
Chamath Palihapitiya: Well the good analogy is Virgin in many ways. The market fit for Virgin’s products was also not well understood during the initial stages and they traded after the close of almost eight or seven dollars, I think.
Bill Mann: Yes, space flights for the rich haven’t attracted people.
Chamath Palihapitiya: I think we live in a world that cycle media, when I went on CNBC and said, “Download the app by house.” It fit into the box of what people wanted to hear. People got to really embrace it.
When people first heard about spaceflight, point-to-point travel, and hybrid rocket engines, they thought, “What are you talking about? Instead, they layered space flights for the rich. But over time, as people took the time to understand the business, to hear from Vivek, Andrew and myself, just as they had heard from George Bitesize at the time and from myself, they understood the truth on the ground and they understood what I saw.
The fit with the product market was the start of the ladder, and a business model that I found really exceptional, and they were willing to go that route. Likewise, I think what they’re showing here is that we priced the deal very fairly. Neither too hot nor too cold using the Goldilocks analogy. I think it was right in the middle, and we trade right in the middle.
There is nothing wrong with it. Vivek got a good fair price, and I think what you’ll see over time is that we got a very fair price as well. Again, there are so many features built into this business. The market is huge and it is growing. The incentives are massive and they are increasing.
These guys are truly the only ones who have found using your language to be a sin, and that sin creates an obvious dilemma for the innovator. It will be impossible for the united and well-founded incentives to decide, to reorient an entire economic model for lower costs and better results, as they are offset by higher costs and inflation of health care. Not because they can’t do it.
Bill Mann has no position in any of the stocks mentioned. Keith Speights has no position in any of the stocks mentioned. Motley Fool owns shares and recommends Virgin Galactic Holdings Inc. Motley Fool owns shares of Clover Health Investments. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.