Date of Review 2/4/2011
UnitedHealth Group Incorporated (UnitedHealth Group) operates a few subsidiaries in the health and wellness category, Insurance, prescription drug resale, and preventative care. This is a "You have to be exposed to healthcare" play.
Price@eval:43.04
Valuation Ratios
Price/Earnings (TTM) . . . . . . 10.5x
Price/Sales (TTM) . . . . . . . . .0.5x
Price/Book (MRQ) . . . . . . . . .1.83x
Price/Cash Flow (TTM) . . . . . .8.31x
Patrick . . . . . . . . . . . . 5/5: PE should increase to ~12x, strong year over year net earnings increases)
Benjamim . . . . . . . . . . 4/5: Expect price to reach 55
Marcel . . . . . . . . . . . . 5/5: Long, strong RSI, accumulate
Davison . . . . . . . . . . . 4/5: 12 mo target $46, High quality stock, A- Credit rating, Strong Relative Strength
Thomas . . . . . . . . . . . 4/5: 10 month trailing = 33.47, Great earnings
Saxon . . . . . . . . . . . . 2/5
It's increased 27.22% over the past year, which doesn't necessarily mean I've missed the bus on this one, but I'm certainly not on time and I'm not really interested in running after anything, I'd almost always rather wait for the next one. Still it's revenue growth is out pacing the industry average (10.3% vs 7.8%). That being said the Obama administration's health care plan which requires everyone to have insurance also mandates that 80 to 85% of all premiums cover medical costs. This will provoke consolidation pressure on everyone if the law isn't repealed by the republicans now that they are in office. UNH stands to win either way, by keeping earnings, expanding client base, or absorbing weak competitors, so overall more or less positive for UNH.
In 2009 83.3% of people had health care coverage (Census) representing 253.6 million people so if that increases to 95% over the next few years that's about 35.6 million additional people who need to find an insurance provider. While I expect there will be a lot of competition for those 35+ million people, every major insurance provider will surely get a share of them possibly increasing thier user bases by 10% or more. All of this is good for profits, my problem is that everyone already knows this and it's priced in.
Personally I'd need a significant buffer due to what I perceive is the inherent risk of monetizing what (even our) society considers a human right. I'd be wary of investing in a free lance fire department or police department, and I'm wary of investing in health insurance companies for the same reason. If you want a health care play, I believe the money is in equipment, devices, and drugs which are more psychologically sheltered from the onus of government intervention with devices being the most sheltered and drugs being the least, but all significantly more than insurance providers.
I'd pick them up between $33 to $40, but beyond that I really can't justify it. Basically the price has broken out already so if you didn't own it in December picking it up now is a mistake. That being said if you can get it for $35 to $38 and want to hold it as a long position I have no problem with that for as much as a 2 to 5% stake depending on your need for a stable earner. At $43 a share it isn't near sexy enough for me considering my current holdings, but if nothing other than share price (including the broader market) changed I'd pick it up for $33-35. And that stipulation makes it basically impossible for me to pick up UNH. Still, as part of my research in UNH I discovered two other companies as part of due diligence, and one of those might be more worth our hard earned money when I eventually get around to reviewing them.
UnitedHealth Group Incorporated (UnitedHealth Group) operates a few subsidiaries in the health and wellness category, Insurance, prescription drug resale, and preventative care. This is a "You have to be exposed to healthcare" play.
Price@eval:43.04
Valuation Ratios
Price/Earnings (TTM) . . . . . . 10.5x
Price/Sales (TTM) . . . . . . . . .0.5x
Price/Book (MRQ) . . . . . . . . .1.83x
Price/Cash Flow (TTM) . . . . . .8.31x
Patrick . . . . . . . . . . . . 5/5: PE should increase to ~12x, strong year over year net earnings increases)
Benjamim . . . . . . . . . . 4/5: Expect price to reach 55
Marcel . . . . . . . . . . . . 5/5: Long, strong RSI, accumulate
Davison . . . . . . . . . . . 4/5: 12 mo target $46, High quality stock, A- Credit rating, Strong Relative Strength
Thomas . . . . . . . . . . . 4/5: 10 month trailing = 33.47, Great earnings
Saxon . . . . . . . . . . . . 2/5
It's increased 27.22% over the past year, which doesn't necessarily mean I've missed the bus on this one, but I'm certainly not on time and I'm not really interested in running after anything, I'd almost always rather wait for the next one. Still it's revenue growth is out pacing the industry average (10.3% vs 7.8%). That being said the Obama administration's health care plan which requires everyone to have insurance also mandates that 80 to 85% of all premiums cover medical costs. This will provoke consolidation pressure on everyone if the law isn't repealed by the republicans now that they are in office. UNH stands to win either way, by keeping earnings, expanding client base, or absorbing weak competitors, so overall more or less positive for UNH.
In 2009 83.3% of people had health care coverage (Census) representing 253.6 million people so if that increases to 95% over the next few years that's about 35.6 million additional people who need to find an insurance provider. While I expect there will be a lot of competition for those 35+ million people, every major insurance provider will surely get a share of them possibly increasing thier user bases by 10% or more. All of this is good for profits, my problem is that everyone already knows this and it's priced in.
Personally I'd need a significant buffer due to what I perceive is the inherent risk of monetizing what (even our) society considers a human right. I'd be wary of investing in a free lance fire department or police department, and I'm wary of investing in health insurance companies for the same reason. If you want a health care play, I believe the money is in equipment, devices, and drugs which are more psychologically sheltered from the onus of government intervention with devices being the most sheltered and drugs being the least, but all significantly more than insurance providers.
I'd pick them up between $33 to $40, but beyond that I really can't justify it. Basically the price has broken out already so if you didn't own it in December picking it up now is a mistake. That being said if you can get it for $35 to $38 and want to hold it as a long position I have no problem with that for as much as a 2 to 5% stake depending on your need for a stable earner. At $43 a share it isn't near sexy enough for me considering my current holdings, but if nothing other than share price (including the broader market) changed I'd pick it up for $33-35. And that stipulation makes it basically impossible for me to pick up UNH. Still, as part of my research in UNH I discovered two other companies as part of due diligence, and one of those might be more worth our hard earned money when I eventually get around to reviewing them.