Is UnitedHealth Group Inc. (UNH) A Good Stock To Buy?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about UnitedHealth Group Inc. (NYSE:UNH) in this article.

UnitedHealth Group Inc. (NYSE:UNH) has experienced a decrease in hedge fund sentiment of late. UnitedHealth Group Inc. (NYSE:UNH) was in 89 hedge funds’ portfolios at the end of September. The all time high for this statistics is 104. Our calculations also showed that UNH ranked 26th among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are tons of tools stock traders put to use to appraise stocks. A duo of the most underrated tools are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top hedge fund managers can outperform the broader indices by a significant amount (see the details here).

John Armitage Egerton Capital

John Armitage of Egerton Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s review the new hedge fund action encompassing UnitedHealth Group Inc. (NYSE:UNH).

Hedge fund activity in UnitedHealth Group Inc. (NYSE:UNH)

At the end of the third quarter, a total of 89 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UNH over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Lone Pine Capital has the number one position in UnitedHealth Group Inc. (NYSE:UNH), worth close to $1.2304 billion, corresponding to 5.3% of its total 13F portfolio. The second largest stake is held by Eagle Capital Management, led by Boykin Curry, holding a $1.1025 billion position; the fund has 4% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish comprise Rajiv Jain’s GQG Partners, John Armitage’s Egerton Capital Limited and Ken Fisher’s Fisher Asset Management. In terms of the portfolio weights assigned to each position Route One Investment Company allocated the biggest weight to UnitedHealth Group Inc. (NYSE:UNH), around 10.06% of its 13F portfolio. Abrams Bison Investments is also relatively very bullish on the stock, setting aside 9.74 percent of its 13F equity portfolio to UNH.

Due to the fact that UnitedHealth Group Inc. (NYSE:UNH) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of funds who sold off their entire stakes by the end of the third quarter. It’s worth mentioning that Doug Silverman and Alexander Klabin’s Senator Investment Group dropped the largest investment of all the hedgies monitored by Insider Monkey, worth about $44.2 million in stock. Roberto Mignone’s fund, Bridger Management, also sold off its stock, about $43 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 7 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as UnitedHealth Group Inc. (NYSE:UNH) but similarly valued. We will take a look at JPMorgan Chase & Co. (NYSE:JPM), Verizon Communications Inc. (NYSE:VZ), Adobe Inc. (NASDAQ:ADBE), Paypal Holdings Inc (NASDAQ:PYPL),, inc. (NYSE:CRM), The Walt Disney Company (NYSE:DIS), and Netflix, Inc. (NASDAQ:NFLX). All of these stocks’ market caps resemble UNH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JPM 118 6058434 -5
VZ 65 2759911 -3
ADBE 106 10503167 2
PYPL 150 11476857 6
CRM 106 11087534 -1
DIS 112 8983570 7
NFLX 104 12878421 -9
Average 108.7 9106842 -0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 108.7 hedge funds with bullish positions and the average amount invested in these stocks was $9107 million. That figure was $8963 million in UNH’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Verizon Communications Inc. (NYSE:VZ) is the least popular one with only 65 bullish hedge fund positions. UnitedHealth Group Inc. (NYSE:UNH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UNH is 37.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 28.1% in 2020 through November 23rd and beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on UNH, though not to the same extent, as the stock returned 7.5% since the end of Q3 (through November 23rd) and outperformed the market.

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