My UNH Thesis: Betting on a Healthcare Giant's Come Back
The healthcare sector has been in decline, which creates interesting opportunities. I recently talked about a few pharma plays - Eli Lilly, Novo Nordisk, and Pfizer.
Here's why I'm investing in
UNH :
UnitedHealth Group (UNH) has tanked ~50% in the past year, but the July 29 (VERY SOON) earnings could flip the script. As a historically dominant player, UNH is now undervalued amid sector weakness, offering massive upside if regulatory fears ease.
Here's my full bull case. 👇 FUNDAMENTAL ANALYSIS
Why the Sell-Off? A Perfect Storm of Bad News
UNH crushed the market for 15 straight years (2009-2023) with positive returns, predictable EPS growth, and 134% gains over the last decade.
But 2024 brought chaos:
This erased gains (down 7% over 5 years), amplified by healthcare sector outflows—the biggest since 2020. But is this overblown? Signs point to yes. The markets almost always overreact to bad news.
Bullish Signals: Insiders Betting Big
The tide is turning:
Plus, UNH's dividend yield is at a record ~3% (vs. 1.5% avg), with 16%+ historical growth and 100%+ free cash flow conversion. Rare combo of yield + growth!
Valuation: Screaming Buy?
Models confirm:
Still, there is fear of DOJ uncertainty—investors hate unpredictability and that's why the stock is so low.
Key Catalyst: July 29 Earnings
This could be UNH's "most important report ever." Watch for:
Positive news = potential rocket 🚀. Expectations are low (20 bearish EPS revisions vs. 0 bullish), so a beat could spark volatility... upward.
Risks: Not Without Bumps
TECHNICAL ANALYSIS
I also did a little technical analysis:
THE PLAN
My plan:
Later today, I will allocate 1% to 1.5% of my portfolio to the stock. If it drops, I will continue to DCA. The stock is already really beaten down, and I think a company this large cannot drop much more.
Quick note: I'm just sharing my journey - not financial advice! 😊
Here's why I'm investing in
UNH :UnitedHealth Group (UNH) has tanked ~50% in the past year, but the July 29 (VERY SOON) earnings could flip the script. As a historically dominant player, UNH is now undervalued amid sector weakness, offering massive upside if regulatory fears ease.
Here's my full bull case. 👇 FUNDAMENTAL ANALYSIS
Why the Sell-Off? A Perfect Storm of Bad News
UNH crushed the market for 15 straight years (2009-2023) with positive returns, predictable EPS growth, and 134% gains over the last decade.
But 2024 brought chaos:
- Feb: Massive cyber attack caused a one-time EPS hit (non-recurring).
- Ongoing: DOJ antitrust probe, criminal fraud investigation, rising Medicare costs, and Optum losses.
- April: Disastrous Q1 earnings miss + lowered guidance.
- Leadership drama: CEO death.
This erased gains (down 7% over 5 years), amplified by healthcare sector outflows—the biggest since 2020. But is this overblown? Signs point to yes. The markets almost always overreact to bad news.
Bullish Signals: Insiders Betting Big
The tide is turning:
- Insider Buying Boom: $32M+ in 2024 (vs. $6.6M in 2019), including new CEO/CFO—highest in 15 years.
- Congress Buying: Q2 2024 saw net purchases for the first time in 5 years (vs. historical selling).
- DOJ Shift: Probe refocusing on pharmacy benefits (PBM) unit, dropping acquisition/monopoly scrutiny—implies no major findings. Great news!
- Sector Tailwinds: Healthcare is one of 3 S&P sectors below historical valuations. Super investors (usually tech-obsessed) are piling in, despite the sector's -10% YTD vs. S&P's +13%.
Plus, UNH's dividend yield is at a record ~3% (vs. 1.5% avg), with 16%+ historical growth and 100%+ free cash flow conversion. Rare combo of yield + growth!
Valuation: Screaming Buy?
- UNH trades at PE ~11.9 (vs. 10-year avg 23)—a steal.
- Analysts project 16.7% EPS CAGR through 2029.
- Conservative Scenario: 16.5% EPS growth + PE to 16.5 = $780/share by 2030 (173% total return, 18% CAGR ex-dividends).
- Optimistic: PE back to 23 = $1,084/share (280% return).
Models confirm:
- DCF (8% FCF growth): ~$484/share (70% upside).
- DDM (7% div growth): ~$607/share (112% upside).
- Blended Fair Value: ~$545/share (75-90% upside from ~$300). Buy below $436 for 20% safety margin.
Still, there is fear of DOJ uncertainty—investors hate unpredictability and that's why the stock is so low.
Key Catalyst: July 29 Earnings
This could be UNH's "most important report ever." Watch for:
- Regulatory/legal updates (DOJ progress).
- Full-year guidance revisions.
- Metrics like medical loss ratio and PBM performance.
Positive news = potential rocket 🚀. Expectations are low (20 bearish EPS revisions vs. 0 bullish), so a beat could spark volatility... upward.
Risks: Not Without Bumps
- Regulatory escalation (e.g., PBM issues) could tank it further.
- Short-term headwinds: Medicare costs, sector selling.
- Mitigants: DOJ de-risking, strong FCF buffer, insider confidence. Enter cautiously—size positions small.
TECHNICAL ANALYSIS
I also did a little technical analysis:
- UNH price is at a resistance level
- My EVaR indicator tells me we are in a low-risk area
- RSI says the stock is oversold
- I added the different price targets for better visualization
THE PLAN
My plan:
Later today, I will allocate 1% to 1.5% of my portfolio to the stock. If it drops, I will continue to DCA. The stock is already really beaten down, and I think a company this large cannot drop much more.
Quick note: I'm just sharing my journey - not financial advice! 😊
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.