Latest news with #StephenHemsley
Yahoo
16 hours ago
- Business
- Yahoo
UnitedHealth's Rebound: Hidden Strength or Hiding Weakness?
Recently, UnitedHealth Group (UNH, Financial) has been the subject of many headlines because of DOJ probes, kickback accusations in nursing homes, and a shocking departure of its CEO. In addition, the value of its shares has dropped by almost 50%. Yet, underneath the news, the business is still strong. Health insurance remains important and strong throughout economic downturns and doesn't react to changes in global trade. In the aftermath, a clear development can be noticed as Stephen Hemsley was appointed CEO again and bought a large amount of stock which fueled a quick increase in share prices. Warning! GuruFocus has detected 4 Warning Sign with UNH. This is real conviction. UnitedHealth is focusing more on Medicaid-managed care, widening value-based care with Optum, and looking into growing its business in dual-eligible and long-term care. The company's financials confirm the trend since earnings have quadrupled in ten years, cash flow is strong, and insiders are buying in. In short, UnitedHealth is using the uncertainty to its advantage. Long-term investors may find the current price as an attractive chance to enter a company that has shown lasting and solid growth. UnitedHealth Group is the biggest health insurer in the United States and ranks highly internationally in healthcare. Its two key segments, UnitedHealthcare and Optum, give people health benefits, pharmacy services, data analysis, and healthcare. More than 150 million people are helped by this company, which is continuing to expand by combining operations and offering value-based care. The company provides insurance through commercial, Medicare, and Medicaid markets, and Optum sparks new ideas in care coordination and pharmaceutical services. UnitedHealth is smartly diversified. The company is doing well due to managed care growth, making money from healthcare improvements, and strategically serving top segments thanks to Optum doing the main work. Medicaid managed care expansion capturing state-level shifts: The move of Medicaid recipients from fee-for-service to managed care can bring huge benefits to UnitedHealth. According to industry statistics, UNH and four other large insurers cover over 50% of people in Medicaid-managed care across the nation. So, when several hundred thousand to millions switch plans, it has a huge effect on the company's finances. Since monthly premiums for complex patients in these states are $600$800, New York, Pennsylvania, and Michigan could add hundreds of millions of dollars to their annual premium earnings. Because of its connections with states, UNH is in a good position to win a major share of this revenue. Value-based care & optum scale turning outcomes into profit: Optum, which drives UNH's value-based approach, recorded $253 billion in revenue in 2024, which was 12% higher than the previous year, and $16.7 billion in operating income. Currently, Optum Health works with close to 4.7 million people in value-based contracts and plans to add another 650k in 2025. Focus on patient care and cost savings are the main aims of these models, and UNH supports this. When Optum grows its care coordination and home services, shared-savings revenue plays a bigger role, already bringing in hundreds of millions and capable of much more. High-Value segments target the dual-eligible and long-term care markets: Instead of raising its volume, UNH is focusing on high-paying customer groups, such as those with both Medicare and Medicaid and patients needing long-term care. Dual-eligibles may receive $2,500 monthly, which means each person will get $30,000 annually. Currently, UNH serves about 500k people, but if it could capture just 2 million of the national enrollments, it could earn $45 billion in annual premiums. Vertical integration with optum: Thanks to Optum, UNH has all its services combined, including pharmacy (over 1.62 billion scripts were handled by OptumRx in 2024), care delivery, data analysis, and provider management. Because of this integration, UNH is ahead in long-term care, managing care effectively, reducing expenses, and boosting results, which other organizations don't have. Overall, UnitedHealth is a leader that is making steady earnings now and is prepared to capture the future of healthcare and population wellness. Now, let's investigate the financial side of UnitedHealth Group. The company had good first-quarter earnings, but it sent a cautious message for the coming months. UnitedHealth Group's quarterly revenue of $109.6 billion was $10 billion higher than the same period last year, showing how much both UnitedHealthcare and Optum are growing. While adjusted EPS of $7.20 surpassed $6.91 from the earlier period, the company adjusted its full-year forecast down to expect adjusted EPS of $26.00 to $26.50. So, what leads to this change of tone? While UnitedHealthcare welcomed 780,000 new members, increased use of health services in Medicare Advantage by its customers caused the company's medical costs to increase above expectations. Because more people needed outpatient and physician care, the medical care ratio rose to 84.8%. For healthcare delivery, this is not necessarily an issue, yet it can still hurt business if prices fall short. Meanwhile, Optum Health experienced challenges with a more diverse member group and reduced payments due to less involvement among members in 2024. Even so, Optum achieved a $63.9 billion revenue thanks to its Rx division, which filled 408 million adjusted scripts. UNH is also operating efficiently, with its operating cost ratio now 12.4%, free cash flow at $5.5 billion, and a high 26.8% return on equity. The company also gave $5 billion back to its shareholders. All in all, UNH's basics are solid, but it has to deal with some short-term problems first. UnitedHealth Group has consistently improved its earnings over the years. In the year 2015, diluted earnings per share was only $6.01. Looking at the trailing twelve months, the number has reached $23.88. Over the past decade, the amount has almost quadrupled. It is even more impressive that the growth has been steady over the years. For many years, UnitedHealth kept increasing its profits, demonstrating the power of its varied businesses and strict management. The only major drop in EPS happened in 2024, with the figure reaching $15.51. Although this was an unusual dip in the company's history, it is on track for a solid recovery in 2025, and first-quarter adjusted EPS was $7.20. Looking into the future, analysts believe the trend will not stop. Even though 2025 is, in some ways, a year of recovery with a projected EPS of $22.59, the company's growth kicks in afterward. By 2026, analysts predict EPS will increase to $26.40, and then keep growing at double-digit rates, aiming for $45.83 by 2030. Source: Author generated based on historical data All in all, despite some occasional setbacks, UnitedHealth's future growth is steady, so patient investors are still in a position to be rewarded. The increase in EPS matches the upward trend in revenue per share. It highlights the company's steady growth and increased success. In the year 2015, the company's revenue per share was $162.47. Now, that figure is $443.16 TTM. That's a 170% jump in ten years, which clearly shows the company is making better use of its growth to help shareholders. What's most promising is that this growth keeps happening consistently. Revenue per share has increased year after year and stayed strong through different economic conditions and impacts on the industry. It is a result of the company attracting more members and expanding its main businesses, UnitedHealthcare and Optum. Once more, this trend keeps happening in the future. Revenue forecasts keep going up from $449.81 billion in 2025 to more than $591 billion by 2030. Minor changes in growth do not stop the company from expanding and creating more value for its shareholders. Source: Author generated based on historical data UnitedHealth Group's free cash flow per share is a reliable sign of how well the company is financially and operationally. The amount of free cash flow per share in 2015 was $8.46. Afterward, the company increased this number, reaching $26.82 for the TTM, which is more than three times higher than its value a decade back. What stands out about this growth is that it follows closely in line with the company's earnings trajectory. Therefore, we see that UnitedHealth's profits are being turned into cash that can be used to strengthen the business, cut debt, or be given back to its shareholders. Being that efficient is not common in an industry that relies heavily on capital like healthcare. UnitedHealth Group gives investors a good dividend since the dividend yield is 2.92% and the payout ratio is only 30%, which suggests that dividends could increase in the future. It's worth noting that over the past 5 years, the company has seen a 14.6% growth in its dividend, which tops inflation and profits long-term investors. Through ten years of constant raises, the yield on cost increases to 15.38%. Although UNH is offering a high yield now, low buybacks mean most capital is shared through dividends. UnitedHealth Group looks deeply undervalued right now. According to GuruFocus, the stock is trading about half its worth, as the fair value is $633.16 but it is currently trading at $303.22. There is a massive disconnect here, and it's very unusual for a company as stable as UNH to deviate so much from its fair value estimate. Valuation multiples are also telling the same story. The forward P/E of this stock is 13.42, which is much lower than the average of 17.66, giving a discount of 23.98%. The company's forward EV/EBITDA of 9.61 is better than the sector's ratio of 11.79. On a price-to-sales ratio, UNH is trading at 0.61 times its projected sales, while the healthcare industry is pricing in at 3.43xa discount of 82%. All in all, UNH gives you both quality and value. Almost all of the valuation measures suggest that the company is undervalued in terms of its earnings, sales, and cash flow. Even though the stock is built on solid foundations and pays out more in dividends each year, it still trades at a lower price than its competitors. As a result, long-term investors can take advantage of acquiring a leader in healthcare at a much lower price than its actual value. When measured against companies like Humana (HUM, Financial) and HealthEquity (HQY, Financial), UnitedHealth Group is still a good buy. Because its forward P/E is lower than HUM's 14.1 times and much lower than HQY's 30 times, it attracts those who want to invest for growth as well as value. Considering price-to-sales, UNH trades at 0.68 times, making it more valuable than HQY's 7.8 while being slightly higher than HUM's very low 0.23. On the EV/EBITDA ratio, UNH stands at 9.6x forward, quite similar to HUM's 9.2x and much less than HQY's 19.2x. All in all, UNH is well-balanced by giving investors scale, profits, dividend growth, and a reasonably attractive price. HUM also does well in various areas, especially when it comes to managing expenses and the way the company works. But in the long run, investors admire UNH for its consistent results and potential to increase. Source: Author generated based on data Going forward, I feel UnitedHealth Group (NYSE:UNH) is well-positioned to achieve a price target of $395$410 in the next year and possibly surpass $525$550 by 2027. Despite the stock's recent volatility, the numbers, the company's health, and the outlook seem to fit together nicely. Let's begin our discussion with the short term. Despite many years of increasing earnings and a high rate of cash conversion, UNH is only valued at 13.4 times its future earnings when the stock is trading at $303. Healthcare companies, on the other hand, have a forward P/E of about 17.6, and UNH has generally had a forward P/E between 18x and 20x during calm times. If UNH is valued at just 17 times the expected FY2025 EPS of $22.59, the price would come to $384. At 18x, If stability comes back and the new leaders reassure everyone, the stock could increase to $406. The story gets even better as you look further into the future. Analysts are predicting that EPS will rise to $45.83 by 2030, meaning it will be about double the current earnings in just five years. Multiply the earnings by 15, and the share price comes out to $687. But, let's narrow our focus to conservatism, and for 2027, the predicted EPS is about $34.50. At this multiple of 15x, the price comes out to $517if the market recovers, shares could climb to $550 or more due to the 16x or 17x rating. If the DOJ investigation ends well and Hemsley's efforts to cut costs are successful, the company should do well over the next few quarters. We are not just discussing theory here. Since 2015, UNH's free cash flow per share has more than tripled, its revenue per share has nearly tripled too, and it still has some of the top dividend growth rates in healthcare. Such consistency, size, and under-valuation are hard to find in one company. Let's look at how Wall Street views this area. Looking at the chart, analysts foresee that the price of Apple shares might rise by 26.2% to $382.80 in the next 12 months. It is estimated that the cost can fall anywhere from $270 to $677. To conclude, although there may be short-term ups and downs, it looks like disciplined, patient investors will find more favorable long-term conditions. When Andrew Witty suddenly left his CEO post in May because of profit problems and dropped 2025 guidance, UNH shares fell over 12% to their lowest point in five years and wiped out more than $250 billion in market value. As a consequence, the board brought back former CEO Stephen Hemsley (who headed the company from 2006 to 2017). Within only a few days, Hemsley made a big step by buying nearly 86,700 shares worth about $25 million for $288.60 per share. Hemsley, together with the CFO and several directors, voted to keep the company's value high, and shares rose by about 8% the following trading day. What does it imply? It is clear that the management views the falling share price of UNH as a good time to purchase. The fact that Hemsley has invested his money shows how much he believes in the company after all it has achieved. Yet, this is not a case of blind faith: the company is dealing with an ongoing investigation, higher medical costs in Medicare Advantage, and a cyberattack it suffered recently. From a strategic point of view, all this buying in UNH suggests that the company's leaders believe the worst has passed and risks for the stock are low. The guru trading chart has an interesting narrative. Although UnitedHealth's stock has gone down recently, gurus have been buying it more frequently. Many green bars are appearing, both early in 2024 and again later in 2025, showing that some informed investors are looking at the dip as an opportunity to buy instead of a warning sign. This trend can be seen in the investor's stock portfolio. Vanguard is still the biggest shareholder, but it slightly reduced its holdings. I'm also paying attention to Ken Fisher (Trades, Portfolio) , who bought much more, a solid 52%, and Jeremy Grantham (Trades, Portfolio) , who increased his holding by over 7%. Though there is selling and shares are reduced as well, institutions tend to be cautiously upbeat. Even though UnitedHealth's future looks bright, investors should still pay attention to the risks in the near term. The DOJ is currently investigating the business for possible Medicare Advantage fraud, such as upcoding and billing errors, which is a very serious matter that could result in being fined or charged in court. At the same moment, Washington is paying more attention to supervision. Should reforms reduce the inflation of risk scores or Medicare allowance for nurse practitioners, it could affect the profitability of Medicare Advantage. Q1 faced some issues because the higher use of medical services caused the medical loss ratio to increase to around 85%, and Optum is still learning to handle CMS's updated risk model. Because of these pressures, there could be more budget reductions for guidance. However, the bad news appears to be mostly factored into share prices. For careful investors who believe the company will survive, this could present an opportunity to buy long-term. The headlines can be very tempting, but stepping back, it appears that UnitedHealth is still a powerhouse lurking in plain sight. It is the same old stuff but with a different sentiment. The long-term story is still in place with the reinstatement of Stephen Hemsley, a recent insider purchase, and a long history of expertise in Medicaid-managed care and the Optum platform in value-based care. Most of that bad news, including the increases in care costs, and regulatory noise, appears to be reflected in price. Sentiment can change at any minute as long as we hear a resolution to the DOJ investigation, a slowdown in the trend of rising Medicare costs, or upbeat guidance in coming quarters. Any of those may be the spark. In the meantime, the stock is currently trading at one of the most attractive valuations it has seen in years, and the set-up is of the sort long-term investors tend to reflect back on with gratitude. If you are waiting to have a clear picture, you may miss the opportunity. However, to the patient and longer-term investors, this may be one of those times when interceding in soreness results in actual payoff. In other words, this just might be a smart time to lean in and buy the stock. This article first appeared on GuruFocus. Sign in to access your portfolio
Yahoo
16 hours ago
- Business
- Yahoo
UnitedHealth's Rebound: Hidden Strength or Hiding Weakness?
Recently, UnitedHealth Group (UNH, Financial) has been the subject of many headlines because of DOJ probes, kickback accusations in nursing homes, and a shocking departure of its CEO. In addition, the value of its shares has dropped by almost 50%. Yet, underneath the news, the business is still strong. Health insurance remains important and strong throughout economic downturns and doesn't react to changes in global trade. In the aftermath, a clear development can be noticed as Stephen Hemsley was appointed CEO again and bought a large amount of stock which fueled a quick increase in share prices. Warning! GuruFocus has detected 4 Warning Sign with UNH. This is real conviction. UnitedHealth is focusing more on Medicaid-managed care, widening value-based care with Optum, and looking into growing its business in dual-eligible and long-term care. The company's financials confirm the trend since earnings have quadrupled in ten years, cash flow is strong, and insiders are buying in. In short, UnitedHealth is using the uncertainty to its advantage. Long-term investors may find the current price as an attractive chance to enter a company that has shown lasting and solid growth. UnitedHealth Group is the biggest health insurer in the United States and ranks highly internationally in healthcare. Its two key segments, UnitedHealthcare and Optum, give people health benefits, pharmacy services, data analysis, and healthcare. More than 150 million people are helped by this company, which is continuing to expand by combining operations and offering value-based care. The company provides insurance through commercial, Medicare, and Medicaid markets, and Optum sparks new ideas in care coordination and pharmaceutical services. UnitedHealth is smartly diversified. The company is doing well due to managed care growth, making money from healthcare improvements, and strategically serving top segments thanks to Optum doing the main work. Medicaid managed care expansion capturing state-level shifts: The move of Medicaid recipients from fee-for-service to managed care can bring huge benefits to UnitedHealth. According to industry statistics, UNH and four other large insurers cover over 50% of people in Medicaid-managed care across the nation. So, when several hundred thousand to millions switch plans, it has a huge effect on the company's finances. Since monthly premiums for complex patients in these states are $600$800, New York, Pennsylvania, and Michigan could add hundreds of millions of dollars to their annual premium earnings. Because of its connections with states, UNH is in a good position to win a major share of this revenue. Value-based care & optum scale turning outcomes into profit: Optum, which drives UNH's value-based approach, recorded $253 billion in revenue in 2024, which was 12% higher than the previous year, and $16.7 billion in operating income. Currently, Optum Health works with close to 4.7 million people in value-based contracts and plans to add another 650k in 2025. Focus on patient care and cost savings are the main aims of these models, and UNH supports this. When Optum grows its care coordination and home services, shared-savings revenue plays a bigger role, already bringing in hundreds of millions and capable of much more. High-Value segments target the dual-eligible and long-term care markets: Instead of raising its volume, UNH is focusing on high-paying customer groups, such as those with both Medicare and Medicaid and patients needing long-term care. Dual-eligibles may receive $2,500 monthly, which means each person will get $30,000 annually. Currently, UNH serves about 500k people, but if it could capture just 2 million of the national enrollments, it could earn $45 billion in annual premiums. Vertical integration with optum: Thanks to Optum, UNH has all its services combined, including pharmacy (over 1.62 billion scripts were handled by OptumRx in 2024), care delivery, data analysis, and provider management. Because of this integration, UNH is ahead in long-term care, managing care effectively, reducing expenses, and boosting results, which other organizations don't have. Overall, UnitedHealth is a leader that is making steady earnings now and is prepared to capture the future of healthcare and population wellness. Now, let's investigate the financial side of UnitedHealth Group. The company had good first-quarter earnings, but it sent a cautious message for the coming months. UnitedHealth Group's quarterly revenue of $109.6 billion was $10 billion higher than the same period last year, showing how much both UnitedHealthcare and Optum are growing. While adjusted EPS of $7.20 surpassed $6.91 from the earlier period, the company adjusted its full-year forecast down to expect adjusted EPS of $26.00 to $26.50. So, what leads to this change of tone? While UnitedHealthcare welcomed 780,000 new members, increased use of health services in Medicare Advantage by its customers caused the company's medical costs to increase above expectations. Because more people needed outpatient and physician care, the medical care ratio rose to 84.8%. For healthcare delivery, this is not necessarily an issue, yet it can still hurt business if prices fall short. Meanwhile, Optum Health experienced challenges with a more diverse member group and reduced payments due to less involvement among members in 2024. Even so, Optum achieved a $63.9 billion revenue thanks to its Rx division, which filled 408 million adjusted scripts. UNH is also operating efficiently, with its operating cost ratio now 12.4%, free cash flow at $5.5 billion, and a high 26.8% return on equity. The company also gave $5 billion back to its shareholders. All in all, UNH's basics are solid, but it has to deal with some short-term problems first. UnitedHealth Group has consistently improved its earnings over the years. In the year 2015, diluted earnings per share was only $6.01. Looking at the trailing twelve months, the number has reached $23.88. Over the past decade, the amount has almost quadrupled. It is even more impressive that the growth has been steady over the years. For many years, UnitedHealth kept increasing its profits, demonstrating the power of its varied businesses and strict management. The only major drop in EPS happened in 2024, with the figure reaching $15.51. Although this was an unusual dip in the company's history, it is on track for a solid recovery in 2025, and first-quarter adjusted EPS was $7.20. Looking into the future, analysts believe the trend will not stop. Even though 2025 is, in some ways, a year of recovery with a projected EPS of $22.59, the company's growth kicks in afterward. By 2026, analysts predict EPS will increase to $26.40, and then keep growing at double-digit rates, aiming for $45.83 by 2030. Source: Author generated based on historical data All in all, despite some occasional setbacks, UnitedHealth's future growth is steady, so patient investors are still in a position to be rewarded. The increase in EPS matches the upward trend in revenue per share. It highlights the company's steady growth and increased success. In the year 2015, the company's revenue per share was $162.47. Now, that figure is $443.16 TTM. That's a 170% jump in ten years, which clearly shows the company is making better use of its growth to help shareholders. What's most promising is that this growth keeps happening consistently. Revenue per share has increased year after year and stayed strong through different economic conditions and impacts on the industry. It is a result of the company attracting more members and expanding its main businesses, UnitedHealthcare and Optum. Once more, this trend keeps happening in the future. Revenue forecasts keep going up from $449.81 billion in 2025 to more than $591 billion by 2030. Minor changes in growth do not stop the company from expanding and creating more value for its shareholders. Source: Author generated based on historical data UnitedHealth Group's free cash flow per share is a reliable sign of how well the company is financially and operationally. The amount of free cash flow per share in 2015 was $8.46. Afterward, the company increased this number, reaching $26.82 for the TTM, which is more than three times higher than its value a decade back. What stands out about this growth is that it follows closely in line with the company's earnings trajectory. Therefore, we see that UnitedHealth's profits are being turned into cash that can be used to strengthen the business, cut debt, or be given back to its shareholders. Being that efficient is not common in an industry that relies heavily on capital like healthcare. UnitedHealth Group gives investors a good dividend since the dividend yield is 2.92% and the payout ratio is only 30%, which suggests that dividends could increase in the future. It's worth noting that over the past 5 years, the company has seen a 14.6% growth in its dividend, which tops inflation and profits long-term investors. Through ten years of constant raises, the yield on cost increases to 15.38%. Although UNH is offering a high yield now, low buybacks mean most capital is shared through dividends. UnitedHealth Group looks deeply undervalued right now. According to GuruFocus, the stock is trading about half its worth, as the fair value is $633.16 but it is currently trading at $303.22. There is a massive disconnect here, and it's very unusual for a company as stable as UNH to deviate so much from its fair value estimate. Valuation multiples are also telling the same story. The forward P/E of this stock is 13.42, which is much lower than the average of 17.66, giving a discount of 23.98%. The company's forward EV/EBITDA of 9.61 is better than the sector's ratio of 11.79. On a price-to-sales ratio, UNH is trading at 0.61 times its projected sales, while the healthcare industry is pricing in at 3.43xa discount of 82%. All in all, UNH gives you both quality and value. Almost all of the valuation measures suggest that the company is undervalued in terms of its earnings, sales, and cash flow. Even though the stock is built on solid foundations and pays out more in dividends each year, it still trades at a lower price than its competitors. As a result, long-term investors can take advantage of acquiring a leader in healthcare at a much lower price than its actual value. When measured against companies like Humana (HUM, Financial) and HealthEquity (HQY, Financial), UnitedHealth Group is still a good buy. Because its forward P/E is lower than HUM's 14.1 times and much lower than HQY's 30 times, it attracts those who want to invest for growth as well as value. Considering price-to-sales, UNH trades at 0.68 times, making it more valuable than HQY's 7.8 while being slightly higher than HUM's very low 0.23. On the EV/EBITDA ratio, UNH stands at 9.6x forward, quite similar to HUM's 9.2x and much less than HQY's 19.2x. All in all, UNH is well-balanced by giving investors scale, profits, dividend growth, and a reasonably attractive price. HUM also does well in various areas, especially when it comes to managing expenses and the way the company works. But in the long run, investors admire UNH for its consistent results and potential to increase. Source: Author generated based on data Going forward, I feel UnitedHealth Group (NYSE:UNH) is well-positioned to achieve a price target of $395$410 in the next year and possibly surpass $525$550 by 2027. Despite the stock's recent volatility, the numbers, the company's health, and the outlook seem to fit together nicely. Let's begin our discussion with the short term. Despite many years of increasing earnings and a high rate of cash conversion, UNH is only valued at 13.4 times its future earnings when the stock is trading at $303. Healthcare companies, on the other hand, have a forward P/E of about 17.6, and UNH has generally had a forward P/E between 18x and 20x during calm times. If UNH is valued at just 17 times the expected FY2025 EPS of $22.59, the price would come to $384. At 18x, If stability comes back and the new leaders reassure everyone, the stock could increase to $406. The story gets even better as you look further into the future. Analysts are predicting that EPS will rise to $45.83 by 2030, meaning it will be about double the current earnings in just five years. Multiply the earnings by 15, and the share price comes out to $687. But, let's narrow our focus to conservatism, and for 2027, the predicted EPS is about $34.50. At this multiple of 15x, the price comes out to $517if the market recovers, shares could climb to $550 or more due to the 16x or 17x rating. If the DOJ investigation ends well and Hemsley's efforts to cut costs are successful, the company should do well over the next few quarters. We are not just discussing theory here. Since 2015, UNH's free cash flow per share has more than tripled, its revenue per share has nearly tripled too, and it still has some of the top dividend growth rates in healthcare. Such consistency, size, and under-valuation are hard to find in one company. Let's look at how Wall Street views this area. Looking at the chart, analysts foresee that the price of Apple shares might rise by 26.2% to $382.80 in the next 12 months. It is estimated that the cost can fall anywhere from $270 to $677. To conclude, although there may be short-term ups and downs, it looks like disciplined, patient investors will find more favorable long-term conditions. When Andrew Witty suddenly left his CEO post in May because of profit problems and dropped 2025 guidance, UNH shares fell over 12% to their lowest point in five years and wiped out more than $250 billion in market value. As a consequence, the board brought back former CEO Stephen Hemsley (who headed the company from 2006 to 2017). Within only a few days, Hemsley made a big step by buying nearly 86,700 shares worth about $25 million for $288.60 per share. Hemsley, together with the CFO and several directors, voted to keep the company's value high, and shares rose by about 8% the following trading day. What does it imply? It is clear that the management views the falling share price of UNH as a good time to purchase. The fact that Hemsley has invested his money shows how much he believes in the company after all it has achieved. Yet, this is not a case of blind faith: the company is dealing with an ongoing investigation, higher medical costs in Medicare Advantage, and a cyberattack it suffered recently. From a strategic point of view, all this buying in UNH suggests that the company's leaders believe the worst has passed and risks for the stock are low. The guru trading chart has an interesting narrative. Although UnitedHealth's stock has gone down recently, gurus have been buying it more frequently. Many green bars are appearing, both early in 2024 and again later in 2025, showing that some informed investors are looking at the dip as an opportunity to buy instead of a warning sign. This trend can be seen in the investor's stock portfolio. Vanguard is still the biggest shareholder, but it slightly reduced its holdings. I'm also paying attention to Ken Fisher (Trades, Portfolio) , who bought much more, a solid 52%, and Jeremy Grantham (Trades, Portfolio) , who increased his holding by over 7%. Though there is selling and shares are reduced as well, institutions tend to be cautiously upbeat. Even though UnitedHealth's future looks bright, investors should still pay attention to the risks in the near term. The DOJ is currently investigating the business for possible Medicare Advantage fraud, such as upcoding and billing errors, which is a very serious matter that could result in being fined or charged in court. At the same moment, Washington is paying more attention to supervision. Should reforms reduce the inflation of risk scores or Medicare allowance for nurse practitioners, it could affect the profitability of Medicare Advantage. Q1 faced some issues because the higher use of medical services caused the medical loss ratio to increase to around 85%, and Optum is still learning to handle CMS's updated risk model. Because of these pressures, there could be more budget reductions for guidance. However, the bad news appears to be mostly factored into share prices. For careful investors who believe the company will survive, this could present an opportunity to buy long-term. The headlines can be very tempting, but stepping back, it appears that UnitedHealth is still a powerhouse lurking in plain sight. It is the same old stuff but with a different sentiment. The long-term story is still in place with the reinstatement of Stephen Hemsley, a recent insider purchase, and a long history of expertise in Medicaid-managed care and the Optum platform in value-based care. Most of that bad news, including the increases in care costs, and regulatory noise, appears to be reflected in price. Sentiment can change at any minute as long as we hear a resolution to the DOJ investigation, a slowdown in the trend of rising Medicare costs, or upbeat guidance in coming quarters. Any of those may be the spark. In the meantime, the stock is currently trading at one of the most attractive valuations it has seen in years, and the set-up is of the sort long-term investors tend to reflect back on with gratitude. If you are waiting to have a clear picture, you may miss the opportunity. However, to the patient and longer-term investors, this may be one of those times when interceding in soreness results in actual payoff. In other words, this just might be a smart time to lean in and buy the stock. This article first appeared on GuruFocus. Effettua l'accesso per consultare il tuo portafoglio
Yahoo
4 days ago
- Business
- Yahoo
Watch the Surge of Insider Buying at UnitedHealth Group
June 16, 2025 (Maple Hill Syndicate) You might think UnitedHealth Group Inc. (NYSE:UNH) would be on the ropes. One of its top executives was shot dead, its CEO resigned for personal reasons, and the federal government is probing its billing practices. But executives at this health-insurance and health-services giant apparently don't think doom is knocking at the door. Five of them have bought the company's stock in the past few weeks, including CEO Stephen Hemsley. Warning! GuruFocus has detected 4 Warning Sign with UNH. Barrage The barrage of bad news that has hit United Health this year is remarkable. Here's a chronology of some of the events that have rocked the company in the past six months. On December 4, 2024, a gunman shot and killed Brian Thompson, the CEO of UnitedHealthcare, the company's insurance arm and biggest component. Five days later, police arrested Luigi Mangione, a 26-year- old cum laude graduate of University of Pennsylvania with a master's degree in computer science. Shell casings at the scene of the crime bore the words delay, deny, depose. A number of Americans expressed more outrage against insurance companies than they did against the murder. On May 13, UnitedHealth Group said that CEO Andrew Witty had resigned for personal reasons. On May 14, the Wall Street Journal reported that the U.S. Department of Justice is investigating the company for possible criminal Medicare fraud. The company said it hasn't been notified of any investigation. In the past half-year, the stock has declined from well over $600 to the present price of about $313. Buyers On May 16, Hemsley paid $25 million to buy 86,700 shares of the giant health-insurance and health-care company. That was the largest purchase by a corporate insider at any company in May and early June. He served as UnitedHealth's CEO from 2006 to 2017. He resumed that office in May, taking over from Witty. After his big purchase in May, Hemsley now owns 1,112,339 shares, worth about $349 million at the June 13 closing price of $313.53. John Rex, the company's president and chief financial officer, spent close to $5 million on May 16 to add to his holdings, now worth about $66 million. Three directors, Kristen Gil, John Noseworthy and Timothy Patrick Flynn, also bought some shares on May 14 and 15. Punished Has this stock been punished too harshly? In my opinion, yes. UnitedHealth Group hasn't had a loss in the past 30 years. In the past decade, its revenue and earnings have grown at double-digit rates, averaging more than 11% a year for revenue and 17% a year for earnings. The stock now fetches a down-to-earth multiple of 13 times earnings. The typical multiple in the past ten years has been close to 22. The balance sheet doesn't look bad either. The company's debt is about 86% of stockholders' equity, which is within the band I consider okay. The company's profitability looks strong. I consider a 15% return on stockholders' equity good, and 20% excellent. UnitedHealth Group in the past four quarters has been 24%, and it has been above 20% in seven of the past eight years. It's worth noting that the recent buying represents a trend reversal. From June 2022 through the end of 2024, no insiders bought shares but several sold. This year, almost all of the activity has been on the buy side. My guess, therefore, is that Hemsley and the other UnitedHealth executive will end up being glad about their May purchases. The Record Today's column is the 74th one I've written about insiders' purchases and sales. I can tabulate one-year results for 64 of them all those from beginning of 1999 through a year ago. A year ago, I recommended Globe Life Inc. (NYSE:GL) and Skyworks Solutions Inc. (NASDAQ:SWKS). The former rose 50.3% but the latter slumped 19.5%. For the same period, the Standard & Poor's 500 Total Return Index returned 14.5% Stocks that I recommended based on insider buys have returned an average of 9.2% a year decent, but 1.3 percentage points less than the index. Stocks that I said to avoid, even though insiders were buying, have under-performed the index by 24.3 percentage points. Stocks where I noted insider buying, but made no comment (or an ambiguous comment) have beaten the index by 14.1 percentage points. Stocks where I noted insider selling have done 2.3 points worse than the index. Bear in mind that my column results are hypothetical and shouldn't be confused with results I obtain for clients. Also, past performance doesn't predict the future. Disclosure: I own UnitedHealth Group shares personally and for many of my clients. John Dorfman is chairman of Dorfman Value Investments in Boston. His firm of clients may own or trade securities discussed in this column. He can be reached at jdorfman@ This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
5 days ago
- Business
- Yahoo
These Were the 2 Worst-Performing Stocks in the S&P 500 in May 2025
The S&P 500 rebounded in May, but some stocks crashed on company-specific concerns. While one healthcare giant withdrew its outlook for 2025, another faced an unexpected setback in a drug trial. Both stocks, however, are worth a watch now. 10 stocks we like better than UnitedHealth Group › The S&P 500 (SNPINDEX: ^GSPC) index, the most widely followed index in the stock market, briefly entered bear market territory in April but rebounded in May, much to investors' relief. Yet, although the index gained 6.2% in May, nearly 30% of its constituent 500 stocks fell last month, with two healthcare stocks emerging as the worst-performing S&P 500 stocks in May. UnitedHealth Group (NYSE: UNH) was the worst-performing stock in the S&P 500 last month. It plunged 26.6% to 52-week lows of $248.88 per share on May 15 after CEO Andrew Witty abruptly resigned and UnitedHealth withdrew its earnings outlook for the full year as Medicare Advantage costs surged. UnitedHealth also found itself in the middle of controversy in May when The Guardian alleged that the company secretly paid bonuses to nursing homes to prevent hospital transfers and cut costs. The Wall Street Journal, meanwhile, alleged that the health insurance giant was facing a criminal investigation by the Department of Justice for a "possible Medicare fraud." UnitedHealth, however, has refuted the allegations made by both publications, appointed former CEO Stephen J. Hemsley with immediate effect, and expects to return to growth in 2026. UnitedHealth's second-quarter earnings on July 29 could determine where the stock is headed next. Shares of Regeneron Pharmaceuticals (NASDAQ: REGN) dived 18.2% in May, losing all that value on May 30 alone after Regeneron's second phase 3 trial for its experimental drug for chronic obstructive pulmonary disease, itepekimab, failed. The drug is being co-developed by Regeneron and Sanofi, and its sales could hit nearly $5 billion at peak. Regeneron stock cracked as investors now believe the drug could be delayed by some years. Regeneron, however, has a robust pipeline, and it initiated a quarterly dividend earlier this year. There's one update you'd want to know, though. Regeneron has been outbid by the co-founder and former CEO of 23andMe, a human genetics and biotech company it bid for in May. Before you buy stock in UnitedHealth Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and UnitedHealth Group wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $653,702!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $870,207!* Now, it's worth noting Stock Advisor's total average return is 988% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 9, 2025 Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Regeneron Pharmaceuticals. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy. These Were the 2 Worst-Performing Stocks in the S&P 500 in May 2025 was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Globe and Mail
6 days ago
- Business
- Globe and Mail
These Were the 2 Worst-Performing Stocks in the Dow Jones Industrial Average in May 2025
The Dow Jones Industrial Average (DJINDICES: ^DJI) index edged 3.9% higher in May, with 70% of its 30 constituent stocks ending the month in positive territory. However, the two worst-performing Dow stocks in May -- both from the healthcare sector -- kept the index's rally in check, with one of them plunging over 25%. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » 1. UnitedHealth Group Shares of UnitedHealth Group (NYSE: UNH) crashed 26.6% in May after multiple negative developments sent shockwaves through the investing community. In mid-May, UnitedHealth suddenly replaced its CEO, Andrew Witty, with former CEO Stephen J. Hemsley with immediate effect and suspended its earnings outlook for the full year because of a surge in medical costs. In between, The Wall Street Journal reported a criminal investigation against UnitedHealth by the Department of Justice for a "possible medicare fraud." Days later, The Guardian released a scathing report alleging UnitedHealth put patients' health at risk by paying secret bonuses to nursing homes to cut hospital transfers. For now, UnitedHealth expects to "return to growth" in 2026 and has sued The Guardian for defamation. Regaining investor confidence, however, may not be easy. The stock is down 38% so far this year, as of this writing. 2. Merck Merck (NYSE: MRK) stock lost 9.8% in May and plunged to its 52-week low of $73.31 a share after President Donald Trump signed an executive order directing drugmakers in the U.S. to cut the prices of prescription drugs. This comes at a time when Merck already expects tariffs to add $200 million to its costs this year. Investors are also worried about Merck's future once its blockbuster oncology drug Keytruda loses patent exclusivity. In mid-May, analysts at Citi slashed Merck stock's price target to $84 per share from $115 per share citing the pharmaceutical company's growth challenges and a "lack of urgency" to develop a business that could soften the impact of a potential loss of up to 20% of sales for Keytruda once its patent expires. Merck, however, has a strong pipeline, remains committed to dividend growth, and yields 3.9%. Should you invest $1,000 in UnitedHealth Group right now? Before you buy stock in UnitedHealth Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and UnitedHealth Group wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $655,255!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $888,780!* Now, it's worth noting Stock Advisor 's total average return is999% — a market-crushing outperformance compared to174%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 9, 2025
