We recently published a list of 10 Worst Performing Dow Stocks Year-to-Date. In this article, we are going to take a look at where UnitedHealth (NYSE:UNH) stands against other worst performing dow stocks year-to-date.
After the disastrous performance of 2022, the market has recovered better than expected and is on a growth trajectory. According to BlackRock’s Q4 2024 Equity Market Outlook, despite concerns about the economy, fundamentals have kept stocks resilient. Opportunities are seen in large-cap stocks, which may outperform both mega and small caps.
Volatility is viewed as normal and can create buying opportunities, especially when driven by market sentiment rather than fundamentals. Historically, market corrections of 10% or more are common but long-term investors have still enjoyed solid returns.
The report states that elections and Fed rate cuts may also impact the market, with rate cuts typically benefiting large-cap and high-quality stocks. Healthcare and consumer staples sectors have traditionally performed well after rate cuts, while cyclical sectors may improve as the economy recovers.
Finally, it mentioned that technology, which is usually a laggard in rate-cutting cycles, looks well-positioned this time due to innovations like AI. Long-term patience is essential in navigating volatility, as the market has proven resilient over decades through various crises.
READ ALSO 8 Best Communication Stocks To Buy According to Analysts and 10 Worst Performing Blue Chip Stocks in 2024
Evaluating Volatility and Valuations in Today’s Stock Market
In a CNBC interview, chief strategist and economist of Solus Alternative Asset, Dan Greenhaus discussed stock market volatility, with mega-cap earnings and the upcoming election contributing to potential fluctuations. He mentioned that the market is already experiencing some volatility, as reflected in the elevated VIX. Despite this, he highlighted that the economy is still growing, albeit at a slower pace, and earnings are rising, which is creating a generally favorable environment for equities.
Greenhaus also addressed concerns about market valuations and noted that while current multiples are high historically, determining what constitutes “rich” valuation levels can be difficult without hindsight.
Lastly, Greenhaus referenced a trading strategy of “buying high and selling higher,” suggesting that investors should remain engaged in the market even during record highs.
Our Methodology
For this article, we checked the year-to-date performance of all the Dow components and selected 10 stocks out of 30, that had the worst share price performance on a year-to-date basis on October 21. We listed the stocks in descending order of their share price performance. We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s Q2 database of 912 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
Share Price Performance Year-to-Date: 5.96%
UnitedHealth Group Incorporated (NYSE:UNH) is a multinational health insurance and services company. It operates primarily under two brands: UnitedHealthcare, which offers a range of insurance products, and Optum, which provides various healthcare services. It is one of the largest healthcare companies by market cap. It is the 7th worst-performing Dow stock.
UnitedHealth (NYSE:UNH) faced several challenges in the year that affected its share price, which included its subsidiary, Charge Healthcare, experiencing a cyber attack in mid-February that disrupted its claims processing. Then on February 28, WSJ reported that the U.S. Justice Department has launched an antitrust investigation into the company, focusing on its relationships between the UnitedHealthcare insurance unit and its Optum health services division.
Investigators were examining how Optum’s acquisitions of physician groups may affect competition, especially whether UnitedHealthcare favors these groups in contracting. The probe also included scrutiny of Medicare billing practices related to documenting patient illnesses.
In addition, UnitedHealth (NYSE:UNH) reported its earnings on October 14, after which, the company’s stock experienced a huge plunge. While the company reported strong earnings, it set its 2025 earnings outlook at a maximum of $30 per share, falling short of Wall Street’s consensus estimate of $31.17.
Although the insurance provider’s 2024 guidance was in line with expectations, CEO Andrew Witty noted that the conservative forecast is largely due to factors affecting its UnitedHealthcare unit, including payment cuts from Medicare, changes related to the Inflation Reduction Act, and discrepancies between Medicaid rates and medical benefits.
Despite that, on October 18, The Fly reported that TD Cowen increased its price target for UnitedHealth (NYSE:UNH) from $601 to $609 and maintained a Buy rating on the stock. The firm adjusted its financial model after reviewing the company’s Q3 results and is now looking forward to the Investor Day on December 4th. At that event, the firm expects to get clearer insights into the company’s earnings per share for 2025, membership in Medicare Advantage plans, and updates on the Medicaid rate situation.
Overall, UNH ranks 7th on our list of worst performing dow stocks year-to-date. 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.
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Disclosure: None. This article is originally published at Insider Monkey.
