Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in UnitedHealth Group Inc. (NYSE:UNH)? The smart money sentiment can provide an answer to this question.
Is UNH a good stock to buy now? UnitedHealth Group Inc. (NYSE:UNH) was in 95 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 105. UNH has experienced a decrease in hedge fund sentiment in recent months. There were 105 hedge funds in our database with UNH positions at the end of the second quarter. Our calculations also showed that UNH ranked 22nd among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a gander at the latest hedge fund action encompassing UnitedHealth Group Inc. (NYSE:UNH).
Boykin Curry of Eagle Capital
Do Hedge Funds Think UNH Is A Good Stock To Buy Now?
At third quarter’s end, a total of 95 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UNH over the last 25 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, GQG Partners held the most valuable stake in UnitedHealth Group Inc. (NYSE:UNH), which was worth $1417 million at the end of the third quarter. On the second spot was Eagle Capital Management which amassed $1205.4 million worth of shares. Lone Pine Capital, Fisher Asset Management, and Egerton Capital Limited were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Route One Investment Company allocated the biggest weight to UnitedHealth Group Inc. (NYSE:UNH), around 8.38% of its 13F portfolio. GuardCap Asset Management is also relatively very bullish on the stock, setting aside 7.72 percent of its 13F equity portfolio to UNH.
Judging by the fact that UnitedHealth Group Inc. (NYSE:UNH) has witnessed bearish sentiment from hedge fund managers, we can see that there was a specific group of hedgies who sold off their entire stakes heading into Q4. Intriguingly, Jimmy Levin’s Sculptor Capital dropped the largest stake of the 750 funds monitored by Insider Monkey, valued at about $263.4 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $157.9 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 10 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to UnitedHealth Group Inc. (NYSE:UNH). We will take a look at Bank of America Corporation (NYSE:BAC), The Home Depot, Inc. (NYSE:HD), Mastercard Incorporated (NYSE:MA), The Procter & Gamble Company (NYSE:PG), ASML Holding N.V. (NASDAQ:ASML), The Walt Disney Company (NYSE:DIS), and Paypal Holdings Inc (NASDAQ:PYPL). This group of stocks’ market valuations match UNH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BAC | 72 | 46487618 | -15 |
| HD | 58 | 4380170 | -6 |
| MA | 146 | 17659997 | -10 |
| PG | 69 | 6414152 | 1 |
| ASML | 41 | 4858031 | -3 |
| DIS | 101 | 9416047 | -11 |
| PYPL | 123 | 12880990 | -20 |
| Average | 87.1 | 14585286 | -9.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 87.1 hedge funds with bullish positions and the average amount invested in these stocks was $14585 million. That figure was $11705 million in UNH’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 41 bullish hedge fund positions. UnitedHealth Group Inc. (NYSE:UNH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UNH is 47.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on UNH as the stock returned 13.7% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Unitedhealth Group Inc (NYSE:UNH)
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Disclosure: None. This article was originally published at Insider Monkey.
