We recently compiled a list of the 12 Best Fortune 500 Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where UnitedHealth Group Incorporated (NYSE:UNH) stands against the other Fortune 500 stocks.
The Fortune 500 list includes companies that generate the highest revenue in the United States. In total, Fortune 500 companies represent two-thirds of the US GDP with $18.8 trillion in revenues, $1.7 trillion in profits, and $43 trillion in market value (as of March 28, 2024), and they employ approximately 31 million people worldwide. Large-cap stocks, which form most of the Fortune 500, are typically safer investments and offer relative stability in times of economic difficulty.
READ ALSO: 11 Best Performing Dow Stocks so Far in 2025
After registering significant gains over the last two years, the broader US market fell sharply on Friday in the wake of weaker-than-expected economic reports and softening consumer demand. A recent report by S&P Global showed that business activity in the US is slowing down, with growth decelerating to a 17-month low. The slowdown is primarily a reflection of rising uncertainty about the business environment, especially in relation to federal government policies regarding domestic spending cuts and the constant threat of looming tariffs.
There are also serious concerns of high inflation due to the said tariffs, causing consumers to be more wary of their spending habits. According to the Tax Foundation, if the tariffs threatened by President Trump are actually imposed, it would amount to an average tax increase of more than $800 per US household in 2025. The tariffs on China alone will add $172 to the tax burden per household, while the rumored imposts on Canadian oil will drive up the price of gas, affecting the entire economy.
That said, some policy measures promised by the Trump administration can also bode well for US corporations and the overall business environment, including taking a less heavy-handed approach towards mergers than under President Biden’s administration. Moreover, the cornerstone of Trump’s second term will be to relax tax policies and extend or make permanent many of the provisions of the 2017 Tax Cuts and Jobs Act that expire at the end of 2025. The President has campaigned on further reducing the base corporate rate to 20%, with an additional cut to 15% for companies that produce goods on American soil.
Another important thing to be mindful of was recently highlighted by Bank of America in a note earlier this month, warning investors of the high concentration levels in the market, where a handful of firms command the lion’s share of investments. This is partially because of passive investing, where investors shovel money into indexes indiscriminately. Passive funds now hold a higher percentage of the US stock market than active funds, which can distort market prices and severely mislead investors. To avoid a potential drawdown, the bank has advised its investors to diversify and consider investing in baskets of quality stocks with lower exposure to the Magnificent Seven stocks.
Methodology
To collect data for this article, we referred to the top 50 companies among the Fortune Global Rankings as of January 20, 2024. We then picked out 12 companies with the highest number of hedge fund investors according to the Insider Monkey database as of Q4 2024. Following are the Best Fortune 500 Stocks to Buy According to Hedge Funds.
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)
Number of Hedge Fund Holders: 150
UnitedHealth Group Incorporated (NYSE:UNH) is a health care and well-being company with team members in two distinct and complementary businesses – its insurance wing UnitedHealthcare and its health services segment Optum.
UnitedHealth Group Incorporated (NYSE:UNH) had a strong 2024 with a revenue of over $400 billion (up 8% YoY) and adjusted earnings per share of $27.66, well within the outlook ranges it set out over a year ago. Moreover, the company grew its domestic customer base served by the UnitedHealthcare business by 2.1 million, while its cohort of Optum patients increased by 600,000. UNH maintains a robust balance sheet and generated an operating cash flow of $24.2 billion last year, 1.6 times its net income. The company also remained committed to its shareholders and returned over $16 billion to shareholders through dividends and share repurchases in 2024.
UnitedHealth Group Incorporated (NYSE:UNH) has consistently paid dividends since 1990, switching from annual to quarterly dividends in 2010, and consistently increasing its dividend ever since. The healthcare company offers a quarterly dividend of $2.10 per share and is included among the 14 Best Large Cap Dividend Growth Stocks to Buy Now.
Barons Funds stated the following regarding UnitedHealth Group Incorporated (NYSE:UNH) in its Q4 2024 investor letter:
“Shares of UnitedHealth Group Incorporated (NYSE:UNH), the largest health care company by revenue, were volatile in the quarter. Quarterly medical cost trends ran higher than expected, the high end of quarterly guidance was cut, and the preliminary 2025 outlook missed consensus. The Republican November election sweep drove shares up, as Republicans have historically been more supportive of managed care, which bodes especially well for Medicare Advantage, the industry’s main growth engine. In December, UnitedHealth’s CEO was shot and killed, and the subsequent outpouring of public anger over the managed care industry’s history of claims denials sparked concern about the industry’s ability to control health care spend. The specter of pharmacy benefit manager (PBM) legislation was an additional pressure along with multiple press pieces questioning managed care practices and profit drivers. Longer term, we believe managed care will remain embedded in the U.S. health care system and UnitedHealth, as the largest, best managed, and most disciplined and forward-thinking company in the industry, will continue to grow.”
Overall UNH ranks 5th on our list of the best Fortune 500 stocks to buy according to hedge funds. While we acknowledge the potential for UNH as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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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Disclosure: None. This article is originally published at Insider Monkey.
