Trading: short this sickly looking health insurance broker

eHealth’s accounting seems too optimistic and regulators are circling, says Matthew Prtridge.

Looking up at some surgeons © Getty Images
How healthy are the group’s sales and profit forecasts? © Getty
(Image credit: Looking up at some surgeons © Getty Images)

America’s S&P 500 index plunged by a third when the coronavirus crisis struck. But it has since rallied and is back to where it was at the beginning of the year. The remarkable rebound suggests that this may be a good time to consider some short-selling ideas. One company that looks a prime target for short-selling is health insurance broker eHealth (Nasdaq: EHTH). The group is in a sector beset by continual regulatory scrutiny, but has nonetheless been on a tremendous tear over the past two years, rising from under $25 a share in June 2018 to around $120 today.

The reason for this surge is that between 2017 and 2019 sales more than doubled, while they are projected to increase by another 50% between 2019 and 2021. The company, previously loss-making, is now making a large profit. It says this is due to the rising popularity of its platform, which allows Americans to compare health-insurance plans online.

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri