We recently published a list of 10 Best Very Cheap Stocks to Buy According to Billionaires In this article, we are going to take a look at where UnitedHealth Group Incorporated (NYSE:UNH) stands against other best very cheap stocks to buy according to billionaires.
Coming off 2 years of healthy broader market performance (~26% total return in 2023, ~25% in 2024), the US Bank Wealth Management believes that the S&P 500 valuations kicked off 2025 at elevated levels. In 2025, stocks continue to face a volatile environment, and in mid-March, the S&P 500 index witnessed a correction (a fall of 10% or more). Despite this, the index’s expected P/E ratio remains marginally above the historic 5-year and 10-year average, says the firm. As per Rob Haworth, senior investment strategy director, U.S. Bank Asset Management, it’s critical that, in 2025, earnings growth remains on track.
Corporate Earnings Projections in 2025
US Bank Wealth Management believes that current market projections hint at the 11.5% S&P 500 earnings growth in 2025 versus the prior year. This number is subject to change. However, Terry Sandven, chief equity strategist for U.S. Bank Asset Management, mentioned that when considering the potential impact of tariffs and other issues, it is difficult to expect that 2025 earnings would meet the current projections. Haworth says that the impact of tariffs on company profits is expected to be mixed. Companies that are more dependent on importing goods manufactured overseas can witness more challenges.
In comparison, the smaller companies, which are not as dependent on foreign trade, are expected to be better placed to mitigate the impact of the trade environment. Because they are not selling in the foreign markets and are not relying on foreign goods, smaller companies can have more pricing power, opines Haworth. This can equate to a healthier earnings picture.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Technology Sector Remains Well-Placed
JPMorgan believes that uncertainty related to the trade and other factors of the US administration’s policy agenda continue to lead to a wait and see attitude from businesses and households. Given that household and corporate balance sheets remain relatively healthy, this attitude is expected to be consistent with a slowness in the broader US activity rather than a recession. Coming to the technology sector, in most part, the balance sheets are in healthy shape, with valuations based on forward earnings sitting at a decent place, says JP Morgan. As per the investment firm, these valuations still demonstrate anticipations for very strong 20%+ earnings growth from the US technology sector in 2025.
Our Methodology
To list the 10 Best Very Cheap Stocks to Buy According to Billionaires, we used a stock screener and Insider Monkey’s exclusive database of billionaire stock holdings to shortlist the companies that trade at a forward P/E of less than ~20.0x. For the stocks with the same number of billionaire holdings, we have used the number of hedge fund investors as a secondary metric to rank the stocks, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A senior healthcare professional giving advice to a patient in a clinic.
UnitedHealth Group Incorporated (NYSE:UNH)
Forward P/E as of March 28: ~17.3x
Number of Billionaire Investors: 23
Number of Hedge Fund Holders: 150
UnitedHealth Group Incorporated (NYSE:UNH) operates as a healthcare company. AM Best, a global credit rating agency, noted the company’s balance sheet strength, which the firm believes is strong, its healthy operating performance, very favorable business profile, and robust enterprise risk management (ERM). The firm also stated that UnitedHealth Group Incorporated (NYSE:UNH) has demonstrated a very strong operating performance with a consistent trend of premium growth, aided by enrollment gains across business lines. The company continues to hold the leading market share in all its business lines and on a national basis. Notably, the premiums and earnings remain well-diversified by business segment and geography.
UnitedHealth Group Incorporated (NYSE:UNH)’s FY 2024 operating cost ratio came in at 13.2% as compared to 14.7% in 2023, demonstrating gains from business portfolio refinement and healthy improvement in operating efficiencies and consumer experiences. In 2025, the company expects revenues of between $450 billion – $455 billion, net earnings of $28.15 – $28.65 per share, and adjusted net earnings of $29.50 – $30.00 per share. Moving forward, UnitedHealth Group Incorporated (NYSE:UNH)’s diverse business model and healthy market position can fuel growth. Its strategy includes the expansion of value-based care models and leveraging the scale and analytics capabilities in a bid to gain market share in government insurance markets.
RiverPark Advisors, an investment advisory firm and sponsor of the RiverPark family of mutual funds, published the Q4 2024 investor letter. Here is what the fund said:
“UnitedHealth Group Incorporated (NYSE:UNH): UNH shares were a top detractor in the fourth quarter after reporting mixed operating metrics for the company’s third quarter and giving disappointing guidance for 2025 ahead of the company’s scheduled analyst day. That investor update was to take place in midtown Manhattan on December 4th but was canceled following the horrific murder of the CEO of the company’s insurance division.
Reported fundamentals for the company’s third quarter included slightly better than expected revenue and EPS but also included a higher Medical Cost Ratio (“MCR” – the ratio of claims paid versus premiums collected). Investors had hoped the company would guide to stabilization heading into 2025 but the company guided 2025 MCR to 86-87% or 150 basis points higher than expected. The rise in MCR has been driven by unfavorable member mix and lower state Medicaid rates relative to current member acuity.
With several at-scale and interconnected businesses, UNH occupies a unique position within the U.S. healthcare system. UnitedHealth has (a) a dominant managed care organization in commercial, Medicare and Medicaid markets, (b) a large and growing presence in local care delivery (OptumHealth’s physicians and ambulatory service centers), (c) one of only three at scale pharmacy benefits managers (OptumRx) and (d) a fast-growing healthcare-information technology, consulting and revenue cycle management business (OptumInsight). The combination of the largest managed care organization (UnitedHealth) with the faster-growing, higher-margin Optum services businesses positions the company to capture a large portion of the future growth opportunities in the U.S. healthcare services industry. We expect balanced growth from both health insurance and health services, leading to consistent high-single-digit revenue growth for the company. With margin expansion from scale, share buybacks from its strong cash generating ability (the company currently has $29 billion in cash), and continued strategic acquisitions, we believe the company can generate mid-teens or better earnings growth for the foreseeable future.”
Overall, UNH ranks 3rd on our list of best very cheap stocks to buy according to billionaires. While we acknowledge the potential of UNH as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than UNH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
