1. UnitedHealth Group Inc (NYSE:UNH)
Number of Hedge Fund Investors: 114
A caller recently asked Jim Cramer about Elevance Health. He said UNH is still the “cream of the crop.”
“I could not believe how they’ve been able to accomplish so much during this period that nobody else has.”
UnitedHealth Group Inc (NYSE:UNH) is indeed the top-of-the-line stock when it comes to the insurance industry. In July the stock was upgraded by Jefferies which cited a strong growth outlook.
“The NT MLR outlook may not be crystal clear, but ‘clear enough’ in Q1/Q2 to rotate focus to a ‘25 growth outlook that is favorable and improving over the past two months,” Jefferies wrote in a note
UnitedHealth Group Inc (NYSE:UNH) is one of the biggest managed healthcare players globally, with segments like UnitedHealthcare, OptumRx, OptumInsight, and OptumHealth. Analysts believe UNH has strong growth catalysts for 2025 because it may be able to raise prices. BofA expects the company’s EPS to approach $28 this year, with steady growth in the low double digits through 2026. Revenue growth is expected by Wall Street in the range of 7% to 8% annually. While dividends are forecasted to rise by more than 10% each year through 2026, the yield may remain under 2%, and its trailing 12-month free cash flow yield is modest at around 1%. Based on these factors, UnitedHealth Group Inc (NYSE:UNH) forward P/E of 20 looks attractive.
Baron Health Care Fund stated the following regarding UnitedHealth Group Incorporated (NYSE:UNH) in its Q2 2024 investor letter:
“Managed health care stocks continued to be weighed down by Medicare Advantage utilization and reimbursement concerns. Lack of near-term visibility on utilization trends was exacerbated by the Change Healthcare cyberattack, which disrupted payors’ normal utilization review and claims adjudication processes while new CMS rules are restricting the number of lower cost hospital observation stays in favor of full inpatient admissions. We believe our managed care holdings are likely to perform better in the second half of the year as investors look to 2025. UnitedHealth Group Incorporated (NYSE:UNH) should see healthy MA enrollment growth as plans that bid aggressively to gain members in 2024 will be forced to cut benefits and/or raise prices to restore margins. We note a Republican win in the upcoming election could result in a more favorable environment for Medicare Advantage companies after two years of adverse Medicare Advantage rate updates under the Biden administration.”
While we acknowledge the potential of UnitedHealth Group Inc (NYSE:UNH), our conviction lies in the belief that under the radar 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 more promising than UNH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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