Here’s Why UnitedHealth Group Incorporated (UNH) Rose in Q1

Baron Funds, an investment management company, released its “Baron Health Care Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund returned 2.54% (Institutional Shares) in the quarter compared to a 3.87% gain for the Russell 3000 Health Care Index (benchmark) and a 4.72% decline for the Russell 3000 Index (the Index). The fund trailed the benchmark due to stock selection and, to a lesser extent, active sub-industry weights. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Baron Health Care Fund highlighted stocks such as UnitedHealth Group Incorporated (NYSE:UNH). UnitedHealth Group Incorporated (NYSE:UNH) is a diversified healthcare company that operates through UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx segments. The one-month return of UnitedHealth Group Incorporated (NYSE:UNH) was -36.50%, and its shares lost 25.77% of their value over the last 52 weeks. On May 9, 2025, UnitedHealth Group Incorporated (NYSE:UNH) stock closed at $380.64 per share with a market capitalization of $345.29 billion.

Baron Health Care Fund stated the following regarding UnitedHealth Group Incorporated (NYSE:UNH) in its Q1 2025 investor letter:

“UnitedHealth Group Incorporated (NYSE:UNH) is a diversified health and well-being company with $450 billion in annual revenue that operates across four segments: UnitedHealthcare, Optum, OptumInsight, and OptumRX. Shares ended the quarter in positive territory as multiple 2024 headwinds began to subside and investors anticipated the start of a more positive rate cycle. After several years of rates that did not match cost trends, the preliminary 2026 Medicare Advantage rate was better than expected; historically, final rates are incrementally higher. The company is well positioned to expand enrollment as it competes against plans that aggressively mispriced in 2024, forcing them to scale back benefits to restore margins. The growing percentage of earnings from higher margin/unregulated Optum and the maturation of Medicare Advantage cohorts should help earnings in 2025. UnitedHealth’s insulation from potential tariff impacts also proved attractive to investors. We remain shareholders.

We added to UnitedHealth Group Incorporated, a leading managed health care company. We think UnitedHealth has several competitive advantages including scale, data, vertical integration with service providers, and leadership in Medicare Advantage and value-based care. We see an attractive business trading at a 10-year low relative valuation and we think fundamentals are likely to improve driven by normalization of medical cost trends and more favorable rates in Medicare and Medicaid.”

UnitedHealth Group Incorporated (NYSE:UNH) is in 18th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 150 hedge fund portfolios held UnitedHealth Group Incorporated (NYSE:UNH) at the end of the fourth quarter which was 112 in the previous quarter. While we acknowledge the potential of UnitedHealth Group Incorporated (NYSE:UNH) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we covered UnitedHealth Group Incorporated (NYSE:UNH) and shared billionaire Paul Tudor Jones’ stocks picks with huge upside potential. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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