Baron Funds, an investment management company, released its “Baron Health Care Fund” second quarter 2023 investor letter. A copy of the same can be downloaded here. The fund advanced 9.22% (Institutional Shares) in the quarter compared to a 3.44% gain for the Russell 3000 Health Care Index (benchmark) and an 8.74% gain for the S&P 500 Index. Since its inception, on April 30, 2018, the fund gained 13.58% on an annualized basis, compared to the benchmark’s 10.85% gain and the S&P 500 Index’s 12.54% return. Favorable stock selection led the fund to outperform in the quarter. Investments in biotechnology, pharmaceuticals, and healthcare equipment accounted for most of the relative gains of the fund in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Baron Health Care Fund highlighted stocks like UnitedHealth Group Incorporated (NYSE:UNH) in the second quarter 2023 investor letter. Headquartered in Minnetonka, Minnesota, UnitedHealth Group Incorporated (NYSE:UNH) is a diversified healthcare company that operates through UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx segments. On July 24, 2023, UnitedHealth Group Incorporated (NYSE:UNH) stock closed at $508.68 per share. One-month return of UnitedHealth Group Incorporated (NYSE:UNH) was 6.18%, and its shares lost 3.93% of their value over the last 52 weeks. UnitedHealth Group Incorporated (NYSE:UNH) has a market capitalization of $473.597 billion.
Baron Health Care Fund made the following comment about UnitedHealth Group Incorporated (NYSE:UNH) in its second quarter 2023 investor letter:
“In early June at an investor conference, management of UnitedHealth Group Incorporated (NYSE:UNH) commented that they were seeing higher levels of outpatient medical activity, particularly among Medicare patients. Management noted strong volumes and activity in orthopedic procedures such as hips and knees as well as stronger care activity in behavioral health. Management further noted this heightened level of care activity could be attributed to pent-up demand as COVID-related mask mandates have finally been dropped and people have become more comfortable accessing health care services they might have delayed during the height of the pandemic. In addition, management cited less capacity constraints in the system. The result of this increased activity led management to raise guidance for the company’s medical loss ratio to the upper half of the existing guidance range. This commentary by management of the bellwether in the industry led to pressure on managed care stocks broadly, while the stocks of health care providers and medical device companies rallied on the expectation for strong medical procedure volumes.
Managed care stocks have been under pressure all year, due to heightened political and regulatory scrutiny of the Medicare Advantage program and the pharmacy benefit management industry, less favorable Medicare Advantage rates for 2024, and higher medical cost trends. UnitedHealth management noted they caught the trend in time to incorporate higher medical cost trends into their pricing for 2024 Medicare Advantage bids. However, questions remain whether this increased utilization of the health care system is a temporary spike or the beginning of a sustained level of activity. We continue to own UnitedHealth, Humana Inc., and Elevance Health, Inc. because we believe these companies will be able to manage through this period without a material earnings impact, but we did modestly reduce our positions in Humana and Elevance Health.”
UnitedHealth Group Incorporated (NYSE:UNH) is in 16th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 116 hedge fund portfolios held UnitedHealth Group Incorporated (NYSE:UNH) at the end of first quarter which was 110 in the previous quarter.
We discussed UnitedHealth Group Incorporated (NYSE:UNH) in another article and shared the list of best low volatility stocks to buy. In addition, please check out our hedge fund investor letters Q2 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
