Burke Wealth Management, an investment management company, released its “Focused Growth Strategy” fourth quarter 2024 investor letter. A copy of the letter can be downloaded here. The market had another outstanding year in 2024, with the S&P 500 rising 25.0%. The strategy had an even better year, with net returns of 28.4%. Looking a bit closer, it is clear that, similar to 2023, 2024 had a rise that was appreciated by everyone, but the overall market returns were concentrated in a small handful of stocks. In addition, please check the fund’s top five holdings to know its best picks in 2024.
In its fourth quarter 2024 investor letter, Burke Wealth Management emphasized stocks such as UnitedHealth Group Incorporated (NYSE:UNH). UnitedHealth Group Incorporated (NYSE:UNH) is a diversified healthcare company that operates through UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx segments. The one-month return of UnitedHealth Group Incorporated (NYSE:UNH) was 0.16%, and its shares gained 2.34% of their value over the last 52 weeks. On March 19, 2025, UnitedHealth Group Incorporated (NYSE:UNH) stock closed at $503.20 per share with a market capitalization of $460.28 billion.
Burke Wealth Management stated the following regarding UnitedHealth Group Incorporated (NYSE:UNH) in its Q4 2024 investor letter:
“UnitedHealth Group Incorporated (NYSE:UNH): Before I discuss our decision to reduce United Health, I want to express our sadness and disgust regarding the tragic murder of UHC CEO Brian Thompson. Our thoughts and prayers are with his family. His murder played no role in our decision to reduce UNH.
We cut our weighting in United Health in half following sluggish third quarter earnings and the initial discussion of 2025 guidance that highlighted one too many headwinds for us to maintain a 6% weighting in the stock. The big issue weighing on the managed care stocks during 2024 has been a reduction in Medicare Advantage reimbursement rates. 2024 was year 1 of a 3 year plan by the government to reduce reimbursements for Medicare Advantage plans. For UNH, 2024 was a year of share loss in the Medicare Advantage business as they had to craft plans with higher copays and lower levels of coverage in order to profitably compete in the space. Competitors like Humana and CVS Aetna weren’t quite as aggressive as UNH in 2024 on adjusting their Medicare Advantage plans and those companies achieved the winners curse of selling more money losing plans. Both of those stocks were down 45% for the year as they suffered one earnings debacle after another. UNH managed through the early phases of this more challenging reality better than its competition. As we looked forward to 2025, we expected to see a rebound in Medicare Advantage market share as competitors chose greater price discipline over bankruptcy. We got that. However, joining Medicare Advantage on this list of concerns was higher than expected Medical Loss Rates (the percent of premiums UNH pays for medical care) due to higher utilization in certain popular drugs that the Inflation Reduction Act removed copays from as well as continued disruption related to the Change Health cyber-attack from April. The disruption from the cyber-attack will ultimately pass but is already taking longer to work through than anticipated. Basically, following the attack UNH gave its hospital partners wider leeway when it came to approving treatments to ensure that any treatments that normally would be approved would not be held back as a result of the attack. Naturally, the approval pendulum swung further than planned and this continues to be an issue that UNH will have to work through with hospital partners and customers. The utilization spike related to the Inflation Reduction Act was a new item of concern courtesy of a few pages tucked neatly inside a thousand page bill that nobody read. More benefits for people, yes. Higher premiums coming as a result, yes. Inflation Reduction an appropriate name for a bill that provides this combination, no. All told, the combination of these three headwinds means that 2025 is going to be a year of 8%-10% earnings growth rather than the long-term target of 14%-16% growth. We will continue to assess this position and the appropriate weighting as we move through 2025.”
A senior healthcare professional giving advice to a patient in a clinic.
UnitedHealth Group Incorporated (NYSE:UNH) is in 18th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 150 hedge fund portfolios held UnitedHealth Group Incorporated (NYSE:UNH) at the end of the fourth quarter which was 112 in the previous quarter. In 2024, UnitedHealth Group Incorporated (NYSE:UNH) announced revenues exceeding $400 billion, and adjusted earnings per share reached $27.66, which fell within the outlook ranges it established over a year ago. While we acknowledge the potential of UnitedHealth Group Incorporated (NYSE:UNH) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed UnitedHealth Group Incorporated (NYSE:UNH) and shared the list of best strong buy stocks to buy. In addition, please check out our hedge fund investor letters Q4 2024 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.