We recently compiled a list of the Top 10 Stocks to Buy According to Eagle Capital Management. In this article, we are going to take a look at where UnitedHealth Group Incorporated (NYSE:UNH) stands against the other stocks.
Eagle Capital Management, a New York-based hedge fund, was founded in 1988 by Beth and Ravenel Curry. Their son, Ravenel Boykin Curry IV, joined the firm around the early 2000s after managing a portfolio at Kingdon Capital and is currently a key partner. A Yale University graduate with an Economics degree and an MBA from Harvard Business School, he plays a pivotal role in the firm’s strategy. Historically, Eagle has outperformed major benchmarks, including the broader market and the Russell Value Index. Over five years, Eagle delivered a 5.7% return versus the market’s 2.4%, and since its inception, it has generated a cumulative return of 2,031%, significantly surpassing both indices.
Eagle Capital Management adheres to a disciplined investment philosophy centered on identifying undervalued companies with unrecognized long-term growth potential. The firm employs a fundamental, bottom-up research approach, focusing on the key drivers of long-term value creation. By maintaining an extended investment horizon, Eagle Capital is able to take a distinctive perspective on industry and company trends. The firm’s investment strategy prioritizes businesses with two essential characteristics: strong underlying assets capable of generating cash flow and sustaining value even in challenging market conditions, and transformative changes within the company that remain unrecognized by the broader market yet are likely to drive future growth. This approach aims to provide downside protection during market downturns while positioning the portfolio for enhanced returns as these changes materialize. These core principles have been integral to Eagle Capital’s strategy since its founding, forming the foundation of its competitive advantage and contributing to its consistent market outperformance since 1988.
Moreover, Eagle Capital Management follows a value-oriented investment strategy with a long-term perspective, assessing price in relation to intrinsic value rather than relying solely on traditional valuation metrics like price-to-earnings or price-to-book ratios. The firm’s investment team focuses on long-term prospects, particularly beyond five years, analyzing business growth, industry dynamics, and margin potential while identifying opportunities that the broader market may overlook. A key component of Eagle’s strategy is maintaining a “Margin of Safety,” achieved through valuation discounts, business resilience, growth potential, and strong, experienced leadership.
The firm concentrates its portfolio on high-conviction investments, typically holding 25-35 stocks. As of Q4 2024, it holds over $27.4 billion in 13F securities, and its top ten positions account for 57.62% of its portfolio. This approach allows Eagle to focus on asymmetric risk opportunities, ensuring that its top positions offer significant upside potential while maintaining strong downside protection. Adopting a private equity-style approach to public equity investing, Eagle builds positions in high-quality businesses with sustainable returns and durability. A rigorous due diligence process precedes any investment decision, and the firm leverages direct access to senior management at portfolio companies to gain deeper insights into long-term strategies, enabling decisive action when the right opportunities emerge. Since its inception, Eagle has consistently applied the same investment philosophy, aiming to generate superior returns through rigorous valuation analysis and a long-term perspective. The firm’s long-term investment horizon allows it to take a differentiated approach to market trends, focusing on businesses undervalued relative to their intrinsic earnings power.
Our Methodology
The stocks discussed below were picked from Eagle Capital Management’s Q4 2024 13F filings. They are compiled in the ascending order of the hedge fund’s stake in them as of December 31, 2024. To assist readers with more context, we have included the hedge fund sentiment regarding each stock using data from 1,008 hedge funds tracked by Insider Monkey in the fourth quarter of 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).
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UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders as of Q4: 150
Eagle Capital Management’s Equity Stake: $1.16 Billion
An American multinational for-profit company specializing in health insurance services, UnitedHealth Group Incorporated (NYSE:UNH) reported total quarterly revenue of $100.81 billion, missing projections of $101.76 billion in Q4 2024. Revenue from premiums also fell short of estimates at $76.48 billion. These lower-than-expected results were attributed to weakness in its health insurance segment and higher-than-anticipated medical costs, causing its shares to drop nearly 5% in premarket trading. The company’s medical cost ratio rose to 85.5%, exceeding analyst expectations of 84.96% and reflecting ongoing pressures from increased demand for healthcare services under Medicare plans. Despite these challenges, UnitedHealth’s Optum healthcare services unit grew 9% to $65.1 billion, and the company posted an adjusted earnings per share of $6.81, surpassing expectations. UnitedHealth Group Incorporated (NYSE:UNH) reaffirmed its 2025 profit forecast, providing strong full-year revenue guidance of $450 billion to $455 billion for 2025, reflecting 12.4% to 13.7% growth. The company maintains a positive long-term outlook despite recent setbacks, including a cyberattack on its tech division and broader industry struggles with rising healthcare costs.
Consequently, UnitedHealth Group Incorporated (NYSE:UNH)’s stock has declined 25.7% from its all-time high of $630.73 in November 2024, underperforming the broader healthcare sector. Over the past three months, UNH has dropped nearly 23% and remains below its 50-day and 200-day moving averages, signaling a prolonged downtrend. Analysts remain bullish on the stock, with a consensus “Strong Buy” rating and an average price target of $639.21, representing a 36.4% upside from its current price.
UnitedHealth Group Incorporated (NYSE:UNH)’s strong full-year revenue guidance alongside its growing Optum healthcare services unit underscores its resilience and long-term growth potential despite short-term challenges. With analysts maintaining a “Strong Buy” rating and a strong price target, the stock presents a compelling investment opportunity at its current discounted levels.
Baron Health Care Fund 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 8th on our list of the stocks to buy according to Eagle Capital Management. While we acknowledge the potential of 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.
