Best Robinhood Stock: Tilray or Clover Health?
Robinhood investors have jumped on the equity bandwagon even this year, and Tilray (NASDAQ: TLRY) was one of their biggest winners. Shares of the Canadian cannabis operator have more than doubled this year.
More recently, investors have crowded into Health Clover (NASDAQ: CLOV). A short likely squeeze nearly tripled the stock in June before giving up some of the gains.
Which of these Robinhood titles is the best choice now? Here’s how Tilray and Clover Health stack up against each other.
The case of Tilray
Tilray is a very different business today than it was just a few months ago. It is also a much bigger business. That’s because the Aphria and Tilray merger was completed on May 3 as part of a deal that created the world’s largest global cannabis company by revenue.
This transaction gives the “new” Tilray the primary market share in the Canadian retail cannabis market. This status, however, could be lost once HEXO finalizes the acquisition of the private company Redecan.
Tilray could have a particularly strong growth opportunity in Europe. The combination of Aphria’s leading German medical cannabis distribution company with the Tilray cannabis production facility in Portugal makes the company a hard-to-beat force in the expanding European medical cannabis market.
The biggest prize of all, however, is that Tilray’s Manitoba Harvest in the US ranks as the leading manufacturer of hemp feeds, with a significant presence in the US market. The company also now owns Sweetwater Brewing, a craft beer maker that focuses on the cannabis lifestyle that Aphria acquired in late 2020.
These companies could give Tilray a springboard to enter the U.S. cannabis market if federal laws were changed to lead the way. It remains to be seen how soon federal cannabis reform will be enacted in the United States, but the chances of that happening are arguably better than they’ve ever been.
The case of Clover Health
Clover Health has an intriguing business model. It is a health insurer that focuses on the health insurance market. However, Clover describes itself as “an innovative technology company improving the health outcomes of American seniors.”
The company’s Clover Assistant software helps physicians develop personalized care plans for patients. Clover Health believes its technology will improve healthcare and generate attractive profit margins in the long run.
So far, Clover Health has targeted the Medicare Advantage market. It is a large market that is growing rapidly due to the aging of the baby boomer generation. The company hopes to use its technology to disrupt Medicare Advantage markets in the United States over time.
But the market for the original Medicare plan is an even bigger opportunity. Clover Health recently launched a direct contracting effort to tackle this market. The company expects to sign between 70,000 and 100,000 initial Medicare beneficiaries by the end of 2021. To put that number in context, Clover predicts that the number of Medicare Advantage members will be around 70,000 by the end of 2021. end of the year.
Eventually, Clover Health believes it can also apply its technology to Medicaid and commercial insurance. The company maintains it can help fix a failing U.S. health care system.
Better Robinhood Action?
I think investors would be wise to heed Clover Health’s recent warning that its stock price “could drop quickly” due to apparent pressure reduction. Due to the insane volatility of the stock right now, I think Tilray is the safest choice in the short term.
However, I also agree with CIBC analyst John Zamparo that Tilray doesn’t have much potential this year after his big run. Zamparo believes federal cannabis reform in the United States is a prerequisite for the Canadian cannabis stock to generate further significant gains. He is probably right.
My take is that Clover Health and Tilray could be big winners in the long run. However, I also wouldn’t rank as good choices to buy right now. There are many other stocks that offer much more attractive risk-reward propositions.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.