Was The Smart Money Right About Betting On UnitedHealth (UNH)?

In this article we will check out the progression of hedge fund sentiment towards UnitedHealth Group Inc. (NYSE:UNH) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

UnitedHealth Group Inc. (NYSE:UNH) has seen an increase in activity from the world’s largest hedge funds recently. UnitedHealth Group Inc. (NYSE:UNH) was in 91 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 104. Our calculations also showed that UNH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Boykin Curry of Eagle Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Now let’s check out the recent hedge fund action surrounding UnitedHealth Group Inc. (NYSE:UNH).

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

At the end of the fourth quarter, a total of 91 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in UNH over the last 22 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Eagle Capital Management was the largest shareholder of UnitedHealth Group Inc. (NYSE:UNH), with a stake worth $1192.2 million reported as of the end of December. Trailing Eagle Capital Management was Lone Pine Capital, which amassed a stake valued at $1115.2 million. GQG Partners, Viking Global, and Fisher Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. 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 10.12% of its 13F portfolio. Abrams Bison Investments is also relatively very bullish on the stock, earmarking 8.12 percent of its 13F equity portfolio to UNH.

As industrywide interest jumped, some big names were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, established the most outsized position in UnitedHealth Group Inc. (NYSE:UNH). Viking Global had $979.7 million invested in the company at the end of the quarter. OrbiMed Advisors also made a $136.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Dan Loeb’s Third Point, Doug Silverman and Alexander Klabin’s Senator Investment Group, and Jeremy Green’s Redmile Group.

Let’s check out 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), NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), Paypal Holdings Inc (NASDAQ:PYPL), Bank of America Corporation (NYSE:BAC), Verizon Communications Inc. (NYSE:VZ), and Adobe Inc. (NASDAQ:ADBE). This group of stocks’ market valuations are closest to UNH’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 105.4 hedge funds with bullish positions and the average amount invested in these stocks was $14824 million. That figure was $10778 million in UNH’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Verizon Communications Inc. (NYSE:VZ) is the least popular one with only 67 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 48.3. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on UNH, though not to the same extent, as the stock returned 11.6% since the end of Q4 (through April 19th) and outperformed the market.

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

Follow Insider Monkey on Twitter