Why I Sold Clover Health Even Though I Like the Stock Long Term

Recently, contributor Matt Frankel, CFP, decided to hit the "sell" button on Medicare Advantage company Clover Health (NASDAQ: CLOV). But unlike with most stocks, he didn't sell this one because of the company's long-term potential. In this Motley Fool Live video clip, recorded on July 2, Frankel discusses his reasons for selling Clover with The Motley Fool's Chief Growth Officer Anand Chokkavelu.

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Matt Frankel: Before we move on from these two, I wanted to address what J.K. just said about meme stocks. He says, "Matt, can you elaborate a little more on why you don't like meme stocks? If you like the business, can handle the wild swings, why wouldn't you? I mainly ask because I hold Clover." First of all, most meme stocks are not great businesses. That's number one. I'm adamantly opposed to anybody buying AMC (NYSE: AMC) or GameStop (NYSE: GME), for example. But if I like the business, it will come back down to earth. If it's trading at a valuation that doesn't make sense. Especially I bought Clover at about $6 a share I sold it at about $18 two months later. I'm fine pocketing a triple and moving on. I think Anand was in the same camp where it's like a borderline conviction stock for them. If it's something, I'll name one of my highest conviction stocks, Pinterest (NYSE: PINS). If Pinterest were to shoot up to $200 a share tomorrow because it was on a Reddit board, I would hold the stock. I wouldn't sell it because it is one of my highest conviction names. Really depends on how high my conviction level is in the stock and I haven't felt the mean stock where it was above a loaded if the valuation's good.

Anand Chokkavelu: I think Clover is one except for the there is enough upside potential where I'm like no. But it's that dream for me, I love that it's a meme stock because, there might be a price I can sell out where I'm happy to just say, well, you know what? Let's say $40. I don't know what the price is exactly. I'd have to work closely. But, hey, yeah, I'll take this and if I'm wrong and it shoots up to $200, well, maybe I just can live with that. But on low-conviction stocks, there's nothing I like better than zooming up and giving me the opportunity at least.

Anand Chokkavelu, CFA owns shares of Clover Health Investments and Pinterest. Matthew Frankel, CFP owns shares of Pinterest and has the following options: long August 2021 $85 calls on AMC Entertainment Holdings and short August 2021 $65 calls on AMC Entertainment Holdings. The Motley Fool owns shares of and recommends Pinterest. 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.

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