Billionaire David Tepper’s 10 Long-Term Stock Picks

7. UnitedHealth Group Incorporated (NYSE:UNH)

Value of Appaloosa Management’s 13F Position (9/30/2024): $102 million

Number of Hedge Fund Shareholders (9/30/2024): 115

Appaloosa has been a shareholder of the world’s largest healthcare company, UnitedHealth Group Incorporated (NYSE:UNH) since Q1 of 2017. The fund ended Q3 of this year with 174,500 UNH shares, down 6% from a quarter earlier. More than 100 funds have been long UNH during each of the past nine quarters, though one of its newest shareholders now has the largest position, as Rajiv Jain’s GQG Partners added a 3.72 million share stake in UNH to its 13F portfolio during Q3.

UnitedHealth Group Incorporated (NYSE:UNH) shares have been under pressure in recent weeks following the killing of CEO Brian Thompson on December 4. The public response to the murder has been borderline schadenfreude and sparked an ongoing debate about the outsized power and perceived heartlessness of insurers like UnitedHealth Group.

That debate reached the floor of the Senate a week later, with reports emerging that a bipartisan bill was in the works that would force health insurers to sell off their pharmacy benefit managers, who work as middlemen that manage insurers’ prescription drug programs. An interim report released by the FTC in July found that PBMs may be responsible for driving up costs and limiting the choice of prescriptions made available to Americans, which could warrant regulatory measures the report concluded.

UnitedHealth Group owns one of the largest pharmacy benefit managers in the country, OptumRX, which managed $222 billion in pharmaceutical spending in 2023 and grew revenue by 16.4% year-over-year to $116 billion, which accounted for 31% of UnitedHealth’s 2023 revenue.

Parnassus Value Equity Fund shared some of the secular tailwinds it sees bolstering UnitedHealth Group Incorporated (NYSE:UNH)’s outlook in the fund’s Q3 2024 investor letter:

“We purchased two new stocks, UnitedHealth Group Incorporated (NYSE:UNH) and Amazon. These are high-quality businesses facing temporary issues, which allowed us to purchase them at discounted valuations. The addition of UnitedHealth increases our small overweight to the Health Care sector. UnitedHealth benefits from secular tailwinds of an aging population, health care cost inflation and increasingly relevant use of heath care data/analytics. It also commands industry leadership when it comes to its extensive assets, vertical integration and deep management bench. Even though the stock has underperformed in the past year, we believe many of those factors have been priced in, positioning it well for growth in the near term.”