Polen Focus Growth Strategy Decided to Exit Its Position in UnitedHealth Group (UNH)

Polen Capital, an investment management company, released its “Polen Focus Growth Strategy” second quarter 2025 investor letter. A copy of the letter can be downloaded here. The market sentiment shifted in the second quarter, from a sharp decline to a V-shaped recovery. In the second quarter, the strategy returned 9.36% (gross) and 9.15% (net) compared to 17.84% for the Russell 1000 Growth Index and 10.94% for the S&P 500 Index. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second quarter 2025 investor letter, Polen Focus Growth Strategy 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 -6.17%, and its shares lost 49.49% of their value over the last 52 weeks. On July 21, 2025, UnitedHealth Group Incorporated (NYSE:UNH) stock closed at $282.14 per share, with a market capitalization of $255.94 billion.

Polen Focus Growth Strategy stated the following regarding UnitedHealth Group Incorporated (NYSE:UNH) in its second quarter 2025 investor letter:

“Finally, we exited our remaining small position in UnitedHealth Group Incorporated (NYSE:UNH) (~1%). After years of continuous earnings growth and durability, the consistency we’ve come to expect from UNH has been fractured. The company reduced its earnings guidance twice recently, as medical costs have exceeded expectations in both the UnitedHealthcare (insurance) and Optum Health (medical practice) segments.

It is difficult to pinpoint a single cause for this divergence as a large, scaled business like UNH should typically have strong visibility into medical cost trends among its members. That said, it appears the company may have pursued new members and revenue growth too aggressively, underestimating the cost of serving these new members, which led to significant margin compression. At the same time, the federal government has reduced the number of diagnosis codes eligible to be risk-adjusted (eligible for higher reimbursement due to complexity). While we expect the business can overcome these issues in a relatively short time frame, the future growth profile could be lower than we expected. The complexity and pace of recovery around these issues are not easily determined. Given our small position and lack of conviction to increase the weighting—even at the lower stock price—we decided to reallocate to a better opportunity in our existing holding, Adobe.”

In another article, we covered UnitedHealth Group Incorporated (NYSE:UNH) and shared the list of most undervalued healthcare stocks to buy according to analysts. In addition, please check out our hedge fund investor letters Q2 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.