We recently published a list of Couch Potato Stock Portfolio: 7 Best Stocks To Invest In. In this article, we are going to take a look at where UnitedHealth Group Incorporated (NYSE:UNH) stands against other best stocks to invest in from Couch Potato portfolio.
Couch Potato investing is the concept of having a portfolio of assets that operate almost entirely on autopilot. This portfolio is intended to withstand shifting market circumstances without needing investors to make major modifications to their asset allocation or objectives. In 1991, Scott Burns came up with the idea, seeking to construct the simplest investment strategy possible: a 50/50 combination of equities and bonds using only two funds. Burns claims that this makes it possibly the most accessible portfolio available, stating that anyone who “can divide by 2” can understand it.
Barclays calculated the weighted average returns of hedge fund portfolios by investor type, which ranged from 10% to 11%. Based on performance, a conventional 60/40 portfolio model would have comfortably outperformed these gains. According to the Lazy Portfolio ETF, a 60% stock/40% bond strategy incorporating the Vanguard Total Stock Market ETF and the Total Bond Market Index Fund would have returned little less than 15% in 2024. Even after 5 years, including 2022, when both stocks and bonds fell in value, the 60/40 method has an average return of 8%. In essence, couch potato investing is a more conservative version of the 60/40 method. More importantly, its dependability shines through in difficult circumstances. For example, between 2000 and 2002, the S&P 500 sank 43.1%, whereas the couch potato portfolio declined just 6.3%.
Unsurprisingly, one possible downside of the couch potato portfolio is that it tends to underperform during notable market upswings. Portfolios with a larger allocation to equities can better capitalize on bullish markets, resulting in higher returns than the more conservative couch potato strategy. This disparity is especially prominent when the proportion of shares in a portfolio exceeds the couch potato approach’s balanced 50/50 mix of stocks and bonds. However, Burns recommends that investors evaluate this strategy comprehensively.
“Your 35-year portfolio, for instance, was worth $884,481 at the end of 2021 and declined $155,601 during 2022. That’s a loss greater than the original $100,000 value.
But so what? The portfolio is way larger than expected or needed.
The good news here is that the historical evidence shows, once again, that we can get through some pretty hard times if we keep our investments simple and cheap.”
Our Methodology
Although couch potato investing discourages individual stock trading in favor of index investment, we chose to examine the Vanguard Total Stock Market ETF and identified some of its best holdings for this list. These equities were then filtered down further based on many parameters, including the hedge fund sentiment around them, a history of stable dividend payments, and well-established businesses.
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), based in Minnetonka, Minnesota, is a renowned US multinational corporation that provides managed healthcare and insurance services. UnitedHealthcare is a for-profit firm with four main segments: Optum Health, Optum Insight, and Optum Rx.
UnitedHealth Group Incorporated (NYSE:UNH) outperformed analyst forecasts with its fiscal year 2024 results. The company’s revenue increased by 8% to $400 billion this year, owing to growth throughout its entire service portfolio. UnitedHealth Group Incorporated (NYSE:UNH) also posted strong cash flow results that were in line with investor expectations.
Piper Sandler maintained its Overweight rating and price target of $600 for UnitedHealth Group Incorporated (NYSE:UNH) on February 26. The firm’s confidence follows a recent drop in UnitedHealth’s stock price, which was impacted by a Wall Street Journal story published on February 21. The article raised questions about risk adjustment coding in Medicare Advantage (MA) programs. Jessica Tassan, an analyst at Piper Sandler, feels the market’s reaction is extreme, calling the stock’s selloff “mathematically nonsensical.”
Bretton Fund stated the following regarding UnitedHealth Group Incorporated (NYSE:UNH) in its Q4 2024 investor letter:
“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 3rd on our list of best stocks to invest in from Couch Potato portfolio. While we acknowledge the potential of UNH as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. 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.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.