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Vanguard Health Care Index Fund ETF’s (VHT) 27.8% returns over the past year reflect significant investor interest in the sector. However, not all stocks in this space have gained because of a favorable industry backdrop. Reddit’s WallStreetBets (WSB)—which captured headlines thanks to its participants’ huge success in squeezing short sellers out of their positions in GameStop (NYSE:GME) earlier this year—gamed weak players with high short interest in the healthcare space too.
But WBS favorites Clover Health Investments, Corp. (CLOV) and COMPASS Pathways plc (CMPS) have lost significant value lately and could witness further declines. Given their high valuations versus their financial strength, or lack thereof, we think that these stocks are best avoided now.
