Hedge Funds Have Never Been This Bullish On UnitedHealth Group Inc. (UNH)

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is a 3.3% probability that Donald Trump will die from the new coronavirus (read the details.). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was UnitedHealth Group Inc. (NYSE:UNH).

Is UnitedHealth Group Inc. (NYSE:UNH) a great investment right now? Money managers are getting more bullish. The number of bullish hedge fund bets improved by 3 in recent months. Our calculations also showed that UNH ranked 22nd among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). UNH was in 91 hedge funds’ portfolios at the end of December. There were 88 hedge funds in our database with UNH holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Boykin Curry of Eagle Capital

We leave no stone unturned when looking for the next great investment idea. For example this gold mining company is acquiring gold mines in Americas at a fraction of the cost of drilling them, so we look into its viability. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned nearly 50% despite the large losses in the market since our recommendation. Keeping this in mind let’s go over the fresh hedge fund action regarding UnitedHealth Group Inc. (NYSE:UNH).

How have hedgies been trading UnitedHealth Group Inc. (NYSE:UNH)?

Heading into the first quarter of 2020, a total of 91 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the third quarter of 2019. On the other hand, there were a total of 82 hedge funds with a bullish position in UNH a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Lone Pine Capital was the largest shareholder of UnitedHealth Group Inc. (NYSE:UNH), with a stake worth $1247.4 million reported as of the end of September. Trailing Lone Pine Capital was Eagle Capital Management, which amassed a stake valued at $1059.7 million. Egerton Capital Limited, GQG Partners, and Orbis Investment Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Abrams Bison Investments allocated the biggest weight to UnitedHealth Group Inc. (NYSE:UNH), around 19.18% of its 13F portfolio. GuardCap Asset Management is also relatively very bullish on the stock, dishing out 9.27 percent of its 13F equity portfolio to UNH.

Consequently, specific money managers were leading the bulls’ herd. Egerton Capital Limited, managed by John Armitage, initiated the most valuable position in UnitedHealth Group Inc. (NYSE:UNH). Egerton Capital Limited had $825.1 million invested in the company at the end of the quarter. Andreas Halvorsen’s Viking Global also initiated a $281.6 million position during the quarter. The other funds with brand new UNH positions are Aaron Cowen’s Suvretta Capital Management, Bob Peck and Andy Raab’s FPR Partners, and Doug Silverman and Alexander Klabin’s Senator Investment Group.

Let’s now review hedge fund activity in other stocks similar to UnitedHealth Group Inc. (NYSE:UNH). We will take a look at The Walt Disney Company (NYSE:DIS), Intel Corporation (NASDAQ:INTC), Verizon Communications Inc. (NYSE:VZ), and The Home Depot, Inc. (NYSE:HD). All of these stocks’ market caps match UNH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DIS 118 4968497 3
INTC 58 6147008 -6
VZ 65 1885232 1
HD 91 4996321 21
Average 83 4499265 4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 83 hedge funds with bullish positions and the average amount invested in these stocks was $4499 million. That figure was $7896 million in UNH’s case. The Walt Disney Company (NYSE:DIS) is the most popular stock in this table. On the other hand Intel Corporation (NASDAQ:INTC) is the least popular one with only 58 bullish hedge fund positions. UnitedHealth Group Inc. (NYSE:UNH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Unfortunately UNH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on UNH were disappointed as the stock returned -7.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Disclosure: None. This article was originally published at Insider Monkey.