Why UnitedHealth Group (UNH) Stock is a Compelling Investment Case

Nomadic Value Investment Partners recently released its Q3 2020 Investor Letter, a copy of which you can download here. The investment firm supports enterprising individuals and families in achieving respectable long-term investment performance. You should check out Nomadic Value’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.

In the said letter, Nomadic Value highlighted a few stocks and UnitedHealth Group Inc (NYSE:UNH) is one of them. UnitedHealth Group Inc (NYSE:UNH) is a health and well-being company. Year-to-date, UnitedHealth Group Inc (NYSE:UNH) stock gained 10% and on October 26th it had a closing price of $323.06. Here is what Nomadic Value said:

“We upsized United Health (UNH) for a couple of reasons. First, the company has performed amazingly well despite the pandemic. It is estimated that 70% of UNH’s patient flow is already directed under VBC arrangements and >50% of patients are seeing internally employed physicians5 . During stay-in-place, UNH was able to continue business as usual for this substantial portion of its patient base by retooling in-person physicians to be virtual care physicians. This is a simple but clear example of how UNH is positioned better than peers to adapt to the rapidly changing environment given its head start with VBC. The company continues to ride the undeniable growth trends of Medicare Advantage and is positioned well for further growth via increased steerage to UNH-employed physicians. Second, while not as “cheap” as when we first entered UNH around this time last year, the company continues to trade at or below the forward earnings multiple of the S&P 500 Index. I think investors are overly bearish on the company and its growth prospects, which is likely in part due to election fears. I don’t think this is reasonable and honestly, the election and its negative effects to healthcare aren’t worth much attention in my view. Instead, we should be focused on the positive effects. The trends to VBC are necessary, whether status quo or Medicare-for-all, and already underway and forward-looking healthcare companies that are part of the solution (increased access, lower cost, better outcomes) are poised to benefit.”

Doctor Specialties with Best Lifestyle

Minerva Studio/Shutterstock.com

In Q2 2020, the number of bullish hedge fund positions on UnitedHealth Group Inc (NYSE:UNH) stock decreased by about 8% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t believe in UnitedHealth’s growth potential. Our calculations showed that UnitedHealth Group Inc (NYSE:UNH) is ranked #22 among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. 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 enewsletter below to receive our stories in your inbox:

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