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UnitedHealth Group

Castle Hill and/or others we advise may hold a material investment in the issuer's securities and may trade into or out of these securities at any time. Our Investment Ideas section of our blog are for informational purposes only and do not constitute investment advice.

Going forward we are going to try and post one or two brief investment ideas every month for our readers. Our hope is to post short bullet point ideas that are easy to understand and help drive our readers to do further research into a company to invest.

UnitedHealth Group is a diversified health/well-being company. It offers products/services to individuals through four segments: UnitedHealthcare (network-based health care benefits), OptumHealth, OptumInsight, and OptumRx (information and technology based health services, consulting, and PBM). It trades under the symbol UNH.

  • Despite a relatively flat 2018 and weak start to 2019 in stock performance, UnitedHealth looks like a strong name in their respective field. The company took advantage of the recent decline in price purchasing $3 billion worth of shares to help reduce their share count. This along with their solid core business helped drive a 20% year over year increase in pretax income in the first quarter. Earnings are expected to grow by 15% for all of 2019.

  • Their healthcare legacy business has been posting solid numbers in recent quarters. In fact, their Optum branch is a model others are striving to replicate in the sector. UnitedHealths' pharmacy benefit arm has also driven others to consolidate, like CVS & Aetna (CVS is another investment name we think is undervalued currently). These kind of mergers are going to change the way healthcare is delivered to consumers in the United States

  • Risks to UnitedHealth are memebership decline, a rapid rise in medical costs, and legislative proposals. While the biggest risk is legislative reform it actually takes a while to get the ball rolling on that type of change. Ironically that is what has led to the share price decline, which we think is overblown at this point. While the equity doesn't provide tremendous value at the recent price we think it will still be a solid performer. Also, the CEO recently purchased over $4.5 million of UNH stock at $131.79 a share which should give shareholders confidence at the current quotation.


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