We recently compiled a list of the Long-Term Stock Portfolio: Best Stocks for 10 Years. In this article, we are going to take a look at where UnitedHealth Group Inc. (NYSE:UNH) stands against the other long-term stocks.
To select stocks with long-term growth potential, investors should focus on fundamental analysis, evaluating financial health through earnings history, revenue growth, and profit margins. Companies that consistently demonstrate earnings growth and possess a strong competitive advantage are more likely to thrive over time. Investing in dividend-paying stocks is also beneficial, as those that regularly increase dividends indicate financial stability. Identifying stocks in growing industries, such as technology, renewable energy, and healthcare, can further guide investment choices. Diversification across various sectors reduces risk, ensuring that underperformance in one area can be balanced by gains in another. By combining such strategies, investors can improve their chances of finding promising stocks that align with long-term financial goals.
On December 26, Drew Pettit, Director at Citi Research, discussed his long-term investment strategy on CNBC as he looks ahead to 2025, emphasizing a “barbell” approach that balances high-growth stocks with lower valuation names. This is relevant for investors considering a long-term stock portfolio over the next decade. Pettit advocates for pairing mega-cap growth stocks with cyclical and defensive sectors, where fundamentals are expected to improve. He believes that adopting this barbell strategy can enhance portfolio resilience and capitalize on diverse market opportunities.
In the realm of AI, Pettit noted a growing enthusiasm among investors. He highlighted a shift in perception, moving beyond backend applications to include companies that are more customer-facing within the AI value chain. When it comes to specific investments within AI, Pettit expressed a preference for semiconductors over software at this time. He pointed to Marvell Technology as a standout choice, projecting that its custom AI chip business could experience remarkable growth, projected at 200% next year, followed by an additional 60% growth in the subsequent year.
Pettit also discussed his strategy for 2025 and outlined plans to reduce exposure to consumer stocks while focusing on attractive areas within the sector that are less sensitive to interest rates. He highlighted the potential of fintech and payment companies and said that they are well-positioned for long-term growth amid deregulation. Pettit emphasized that his firm’s focus is not on cryptocurrencies like Bitcoin but on traditional payment networks. He expressed concerns about consumer data trends and interest rate changes, advocating for a balanced approach by seeking high-quality stocks less affected by rate fluctuations and recommending key positions such Big Tech for long-term investment.
Methodology
We first sifted through ETFs, online rankings, and internet lists to compile a list of the top blue-chip stocks with a 10-year revenue compound annual growth rate of over 10%. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A senior healthcare professional giving advice to a patient in a clinic.
UnitedHealth Group Inc. (NYSE:UNH)
10-Year Revenue CAGR: 11.88%
Number of Hedge Fund Holders: 112
UnitedHealth Group Inc. (NYSE:UNH) is a global healthcare company that offers health insurance plans through its UnitedHealthcare segment, and healthcare services through its OptumHealth segment. UnitedHealthcare provides health plans for individuals, employers, and government programs. OptumHealth offers health services like pharmacy care services, health information and technology, care delivery, care management, and population health management.
Its key growth driver is its strategic transition to value-based care, a healthcare delivery model that prioritizes improving patient outcomes and reducing costs by incentivizing quality over quantity. This is demonstrated by the company’s significant investments in OptumHealth. In 2023, OptumHealth revenues grew by over $2 billion, reaching ~$26 billion, driven by an increase in the number and type of care services offered and the patients served.
Patients served by OptumHealth’s value-based care models have shown improvements in key health metrics. For example, they are more likely to receive cancer screenings, have better control of chronic conditions like diabetes and hypertension, and are 10% less likely to experience emergency room visits or be readmitted to the hospital compared to patients in traditional fee-for-service models. UnitedHealth Group Inc.’s (NYSE:UNH) is well-positioned to capitalize on the evolving healthcare landscape and continue to deliver strong financial performance.
Parnassus Value Equity Fund finds an attractive investment opportunity in UnitedHealth Group Incorporated (NYSE:UNH), a high-quality company with strong long-term growth prospects trading at a discounted valuation. Here’s what the firm stated in its Q3 2024 investor letter:
“We purchased two new stocks, UnitedHealth Group Incorporated (NYSE:UNH) and Amazon. These are high-quality businesses facing temporary issues, which allowed us to purchase them at discounted valuations. The addition of UnitedHealth increases our small overweight to the Health Care sector. UnitedHealth benefits from secular tailwinds of an aging population, health care cost inflation and increasingly relevant use of heath care data/analytics. It also commands industry leadership when it comes to its extensive assets, vertical integration and deep management bench. Even though the stock has underperformed in the past year, we believe many of those factors have been priced in, positioning it well for growth in the near term.”
Overall UNH ranks 6th on our list of the best stocks for 10 years. While we acknowledge the growth potential of UNH as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UNH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.