3. 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)
