We recently compiled a list of the 10 Best Low Volatility Stocks to Invest in Now. In this article, we are going to take a look at where UnitedHealth Group Incorporated (NYSE:UNH) stands against the other low volatility stocks. We will also discuss the latest updates around the market and political situation of the US.
Market Begins November on a Dynamic Note
The first week of November has been quite eventful so far. Presidential candidate Donald Trump won the election and President Joe Biden, speaking from the Rose Garden after the election, pledged a peaceful transition of power on January 20.
Moreover, Federal Reserve Chair Jerome Powell announced a quarter-point rate cut on November 7, aimed at supporting strong employment and steady inflation. Economic indicators show solid growth, with GDP rising by 2.8% in the third quarter and consumer spending remaining strong. While the housing sector remains weak, other areas like equipment investment have strengthened.
The labor market shows resilience despite a slowdown in job gains and an uptick in the unemployment rate to 4.1%. Inflation has cooled significantly, nearing the Fed’s 2% target. However, core inflation remains slightly above that level.
In response to questions, Chair Powell noted that the U.S. election isn’t expected to influence near-term Fed policy, as future policy changes and their economic effects remain uncertain. He acknowledged that higher Treasury yields likely reflect expectations of stronger economic growth rather than inflation concerns.
Looking ahead to December, Powell stated that the Fed will assess data on inflation, employment, and economic growth to determine if further policy recalibration is needed. He emphasized the Fed’s effort to balance rate adjustments to avoid moving too quickly or too slowly, aiming to sustain a strong labor market while bringing inflation closer to the 2% target.
The market is taking the news well and all three major market indices closed at all-time highs on November 7. While things seem to be on track, it is important to note that such events sometimes also bring volatility and uncertainty.
Read Also: 10 Best Stocks Under $100 To Invest In and 10 Best Stocks to Buy and Hold For 5 Years.
Economic Outlook in an Era of Unpredictable Policies
In a recent interview on CNBC’s Squawk Box, Former Federal Reserve Vice Chairman Roger Ferguson discussed the complexities surrounding recent economic and policy changes. Ferguson noted that the Federal Reserve’s approach remains cautious, taking a “wait-and-see” stance to assess how policies impact the economy.
He mentioned Fed Chair Powell’s resistance to providing overly specific future guidance and instead emphasized data-based decisions. Additionally, Ferguson highlighted that external factors such as tariffs and changes in the energy market could create varied inflationary pressures. While deregulation might counterbalance some inflation risks, tariffs could still add complexity.
The conversation touched on the “neutral rate,” with Ferguson indicating that it will play a crucial role moving forward, especially given shifts in bond yields and their impact on inflation expectations. Ferguson conveyed that uncertainty in policy directions requires flexibility in economic responses, with ongoing adjustments as more details unfold.
Our Methodology
For this article, we used the Yahoo Finance stock screener to identify around 250 large to mega-cap stocks with a 5-year beta (monthly) between 0.2 and 0.8. We narrowed our list to 10 stocks most widely held by institutional investors and listed them in ascending order of their hedge fund sentiment. The hedge fund sentiment was taken from Insider Monkey’s Q2 database of over 900 elite 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 275% since May 2014, beating its benchmark by 150 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: 114
5-year Beta (Monthly): 0.59
UnitedHealth Group Incorporated (NYSE:UNH) is a leading healthcare and well-being company, providing a range of health benefits and services to improve the quality and accessibility of care. Operating through its two primary divisions, UnitedHealthcare and Optum, the company supports individuals, employers, and government programs across the U.S. and internationally.
It delivers health insurance plans and services, focusing on the needs of individuals, families, and specialized populations, while Optum integrates health services and technology to enhance care delivery, manage complex medical needs, and optimize healthcare costs.
UnitedHealth (NYSE:UNH) reported strong Q3 earnings with non-GAAP EPS of $7.15 outperforming the estimates by $0.12 and revenue of nearly $101 billion was up over 9%, exceeding the estimates by $1.52 billion. It was driven by $2 billion growth in OptumHealth, $5 billion in OptumRx, and stability in OptumInsight, with a $33 billion backlog.
The company expanded its domestic commercial membership by over 2.4 million in the first three quarters, while Medicaid business secured new contracts across multiple states. It expects growth in Medicare Advantage and OptumRx. The company plans a conservative start to 2025 given the second year of Medicare rate cuts, IRA impacts, and Medicaid funding lags but aims for steady progress on its long-term objectives.
UnitedHealth’s (NYSE:UNH) adjusted earnings for 2024 are projected between $27.50 and $27.75 per share, factoring in disruptions from a recent cyber-attack and unexpected care costs. We discussed the cyber attacks in our 10 Worst Performing Dow Stocks Year-to-Date article.
In its Q3 investor letter, Wedgewood Partners said that the company was a top contributor to the portfolio in Q3 as its shares rebounded over the quarter. By adjusting Healthcare pricing and focusing on value-based care through Optum, which saw over 15% income growth, UnitedHealth (NYSE:UNH) effectively counters medical cost inflation. This strategy, particularly beneficial for Medicare, reduces healthcare costs and improves patient outcomes through preventive and home-based care.
Moreover, Baron Health Care Fund stated the following regarding UnitedHealth Group Incorporated (NYSE:UNH) in its Q3 2024 investor letter:
“UnitedHealth Group Incorporated (NYSE:UNH) is a leading health and well-being company that operates across four segments: UnitedHealthcare, Optum Health, OptumInsight, and OptumRX. Despite complex Q2 results that involved multiple adjustments and an elevated medical loss ratio that management attributed to a cyberattack on its Change Healthcare platform, shares increased on positive management comments and reaffirmation of adjusted EPS guidance for 2024. We believe UnitedHealth should continue to see strong growth and profitability, driven by positive demographic trends and its ability to manage costs by leveraging its size and scale, continuing its industry-leading technology investments, expanding its expertise in population health, and growing its portfolio of providers.”
Overall UNH ranks 1st on our list of the best low volatility stocks to invest in now. While we acknowledge the potential of UNH as an investment, our conviction lies in the belief that 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.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.