Was The Smart Money Right About Piling Into UnitedHealth Group Inc. (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.

Is UnitedHealth Group Inc. (NYSE:UNH) ready to rally soon? The best stock pickers were buying. The number of bullish hedge fund positions improved by 16 in recent months. UnitedHealth Group Inc. (NYSE:UNH) was in 105 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 104. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that UNH ranked 17th among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Armitage of Egerton Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Recently we came across a high growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to take a look at the key hedge fund action encompassing UnitedHealth Group Inc. (NYSE:UNH).

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

At the end of June, a total of 105 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the first quarter of 2020. On the other hand, there were a total of 96 hedge funds with a bullish position in UNH a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, GQG Partners held the most valuable stake in UnitedHealth Group Inc. (NYSE:UNH), which was worth $1483 million at the end of the second quarter. On the second spot was Eagle Capital Management which amassed $1287.9 million worth of shares. Lone Pine Capital, Fisher Asset Management, and Egerton Capital Limited 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 8.03% of its 13F portfolio. GuardCap Asset Management is also relatively very bullish on the stock, dishing out 7.84 percent of its 13F equity portfolio to UNH.

As one would reasonably expect, some big names have been driving this bullishness. Renaissance Technologies, assembled the most outsized position in UnitedHealth Group Inc. (NYSE:UNH). Renaissance Technologies had $157.9 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also made a $33.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Gordon W Malin’s Mountain Road Advisors, Andrew Weiss’s Weiss Asset Management, and Donald Sussman’s Paloma Partners.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as UnitedHealth Group Inc. (NYSE:UNH) but similarly valued. These stocks are Mastercard Incorporated (NYSE:MA), Bank of America Corporation (NYSE:BAC), Paypal Holdings Inc (NASDAQ:PYPL), The Home Depot, Inc. (NYSE:HD), The Procter & Gamble Company (NYSE:PG), The Walt Disney Company (NYSE:DIS), and ASML Holding N.V. (NASDAQ:ASML). All of these stocks’ market caps are similar to UNH’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 96.3 hedge funds with bullish positions and the average amount invested in these stocks was $15179 million. That figure was $13125 million in UNH’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 44 bullish hedge fund positions. UnitedHealth Group Inc. (NYSE:UNH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UNH is 71.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Hedge funds were also right about betting on UNH as the stock returned 15.4% since the end of Q2 (through 10/29) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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