Should I Avoid UnitedHealth Group Inc. (UNH)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about UnitedHealth Group Inc. (NYSE:UNH) in this article.

UnitedHealth Group Inc. (NYSE:UNH) shareholders have witnessed a decrease in hedge fund interest recently. UnitedHealth Group Inc. (NYSE:UNH) was in 89 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 104. There were 91 hedge funds in our database with UNH positions at the end of the fourth quarter. Our calculations also showed that UNH ranked 30th among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Boykin Curry of Eagle Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a peek at the recent hedge fund action surrounding UnitedHealth Group Inc. (NYSE:UNH).

Do Hedge Funds Think UNH Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 89 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from the fourth quarter of 2020. By comparison, 104 hedge funds held shares or bullish call options in UNH a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, GQG Partners, managed by Rajiv Jain, holds the number one position in UnitedHealth Group Inc. (NYSE:UNH). GQG Partners has a $1.2256 billion position in the stock, comprising 4.5% of its 13F portfolio. Sitting at the No. 2 spot is Eagle Capital Management, led by Boykin Curry, holding a $1.2129 billion position; the fund has 3.7% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish contain Lone Pine Capital, Andreas Halvorsen’s Viking Global and Ken Fisher’s Fisher Asset Management. 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 8.95% of its 13F portfolio. GuardCap Asset Management is also relatively very bullish on the stock, designating 7.91 percent of its 13F equity portfolio to UNH.

Because UnitedHealth Group Inc. (NYSE:UNH) has witnessed declining sentiment from the smart money, it’s easy to see that there were a few money managers who sold off their positions entirely heading into Q2. It’s worth mentioning that Arthur B Cohen and Joseph Healey’s Healthcor Management LP cut the biggest stake of all the hedgies followed by Insider Monkey, totaling close to $61.4 million in stock. Guy Shahar’s fund, DSAM Partners, also dropped its stock, about $25.2 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds heading into Q2.

Let’s go over hedge fund activity in other stocks similar to UnitedHealth Group Inc. (NYSE:UNH). We will take a look at The Walt Disney Company (NYSE:DIS), Bank of America Corporation (NYSE:BAC), The Procter & Gamble Company (NYSE:PG), NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), Paypal Holdings Inc (NASDAQ:PYPL), and Intel Corporation (NASDAQ:INTC). This group of stocks’ market values match UNH’s market value.

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As you can see these stocks had an average of 96.4 hedge funds with bullish positions and the average amount invested in these stocks was $14187 million. That figure was $12091 million in UNH’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand The Home Depot, Inc. (NYSE:HD) is the least popular one with only 68 bullish hedge fund positions. UnitedHealth Group Inc. (NYSE:UNH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UNH is 42.7. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately UNH wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); UNH investors were disappointed as the stock returned 6.9% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

Disclosure: None. This article was originally published at Insider Monkey.