We recently published a list of 12 Best Quality Stocks to Invest in Now. In this article, we are going to take a look at where UnitedHealth Group Incorporated (NYSE:UNH) stands against other best quality stocks to invest in now.
Tom Lee, co-founder of Fundstrat Global Advisors, believes that a significant rebound is in the offing, despite the tough start to the year. The strategist opines that there is a possibility of ~10% – 15% bounce over the coming months. In an interview with CNBC, he stated his expectations about March, April, and May witnessing the rally. Therefore, missing critical trading days can be a mistake for investors.
What Lies Ahead?
Lee believes that investors can consider buying as the markets are unsettled. In an interview with CNBC, he went on to explain that the market’s 10 best days last year resulted in the addition of up to 20 percentage points for the broader S&P 500. However, if we exclude these 10 days, the index increased by only 4%. According to him, the best days might be around the corner. If there are tensions related to the growth or related to the employment market, Trump or the US Fed can intervene to bring some stability. These are the favourable catalysts for the upcoming weeks, says Lee. Overall, he believes that a large chunk of the bad news has been priced in as markets have seen a significant decline.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Signs of Economic Strength Remain
Morningstar, while echoing the views of Adam Hetts (Janus Henderson Investors portfolio manager), mentioned that the longer-term perspective is expected to provide investors a silver lining. Hetts believes that there are bright spots in the international markets such as Europe and China, that have surpassed the performance of the US stocks since the beginning of the year. Even though the mega-cap tech stocks have been declining, they are getting cheaper as compared with the elevated valuations just a few months ago.
According to experts, there are several signs of economic strength. Gus Faucher, chief economist for PNC Financial Services Group, told Morningstar that consumers continue to spend amidst weakness in the sentiment data. Also, the labor market has been holding up. Overall, the chief economist doesn’t see any sort of fundamental weaknesses in the broader economy that can signal a problem. As per Morningstar chief US market strategist David Sekera, the investors are required to focus on the fundamentals and valuations, while maintaining a long-term view.
Our Methodology
To list the 12 Best Quality Stocks to Invest in Now, we sifted through the holdings of iShares MSCI USA Quality Factor ETF. Next, we chose the stocks that are popular among hedge funds. Finally, the stocks were arranged in ascending order of their hedge fund sentiment, as of Q4 2024.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A senior healthcare professional giving advice to a patient in a clinic.
UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 150
UnitedHealth Group Incorporated (NYSE:UNH) operates as a health care company in the United States and internationally. TD Cowen analyst Ryan Langston maintained a “Buy” rating on the company’s stock, setting the price target of $609.00. The rating stems from factors, including the company’s ability to surpass market anticipations and the confidence in financial outlook. As per the analyst, UnitedHealth Group Incorporated (NYSE:UNH)’s strategic initiatives and pricing strategies can fuel growth. The company has affirmed its 2025 performance outlook, including revenues in the range of $450 billion – $455 billion and net earnings of between $28.15 – $28.65 per share.
The analyst also highlighted that UnitedHealth Group Incorporated (NYSE:UNH) managed to improve its operating cost ratio, mainly because of the strategic portfolio initiatives, which remains a positive indicator for future profitability. The FY 2024 operating cost ratio came in at 13.2% as compared to 14.7% in 2023. Overall, the reaffirmed price target demonstrates confidence in the projected earnings growth and strategic positioning. UnitedHealth Group Incorporated (NYSE:UNH)’s diversified portfolio, which includes health insurance, pharmacy benefits management, and healthcare services, places it well for long-term growth. Notably, the synergies between the segments enable cross-selling and integrated care delivery models.
Bretton Capital Management, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“We invest in UnitedHealth Group Incorporated (NYSE:UNH) because we believe this revealed preference is real. The regulatory landscape changes constantly, there is plenty of noise in the system, and it is possible to imagine a world where health insurers would not be necessary. However, the massive healthcare system we’re in today structurally relies on private companies to play the crucial role of managing care and negotiating prices, and we don’t think the US government is prepared to take all that over. It was a bad year for our investment, as the stock returned a negative 2.4%, but it trades for a meaningful discount to the market despite consistently delivering double digit earnings growth for years, including 10% last year.
First, the elephant in the room. On December 4, Brian Thompson, who ran UnitedHealth’s insurance business, was assassinated in New York City. Shell casings had the words “deny” and “depose” written on them, a bullet was inscribed with “delay.” Five days later, Luigi Mangione was arrested in Pennsylvania with what appears to be the murder weapon and a manifesto criticizing the American healthcare system. Mangione has since become a cult celebrity.
Healthcare is not a normal market. Governments have decided that healthcare is worth intervening in to achieve noneconomic outcomes, most notably providing care for people who can’t afford it. Each country’s regulatory system designs its system and rations healthcare in its own way: the UK employs providers directly and attempts a central triage function to allocate care; continental European systems typically have private providers but some version of all-payer rate setting; and the US has a decentralized model where providers can charge whatever they want, but payers can choose not to pay it, plus government-run systems like Medicare and Medicaid that cover about 35% of Americans. Every system implements some type of brake on costs, usually a combination of the government and private companies, and the US system leans more on the private sector for this than others. Our system is not without its benefits. It is vastly more lucrative for providers like surgeons and medical device companies. It also allows for some measure of money signal; if you are a rich weekend warrior with an orthopedic issue, the American system will offer a dizzying array of cutting-edge specialists where the UK would suggest getting used to the feeling of aging and stiffening one’s upper lip. However, our system violates the social expectation of the word “insurance…” (Click here to read the full text)
Overall, UNH ranks 8th on our list of best quality stocks to invest in now. While we acknowledge the potential of UNH as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued 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.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.
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