United Health all time high
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Reacting to a Trump win, UNH is +8% in pre market
First, the expiry of subsidies which would have been tougher to negotiate with a Harris administration.
Secondly, the potential for Medicare Advantage reform. Medicare Advantage has been a focus of both the Biden and Trump administrations, where Trump focused on expanding membership as a private alternative to government care for seniors, while Biden focused on increasing regulations and lowering government payments to Medicare plans.
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UNH has had a tough time since the shooting. The reaction is over done in my opinion and it's now trading at very low multiples-sentiment based not fundamental based. It's one holding of 10 in 'Equity'. It's also obvious that growth/tech stocks are hoovering up a lot of the cash investment so it's a natural rotation out of other sectors and into Tech. You can clearly see the performance diversion between Equity and IML across any time frame to see that . So do our clients based on their change in investment decisions.
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Hmmm, when tech was getting a bit of a hard time, you'd have expected phe to have picked up, pity it didn't, might be time to ditch it from my selection, appears to be dying a death of a hundred cuts.
How's its performance v its benchmark over the past 3 years to date? What's the benchmark?
Tia
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I would say benchmarks are a bit of red herring because a 10 stock portfolio can be tricky to match against a benchmark. Compare it to the SP500/Fundsmith etc PHE 5 year geometric avg return is about 7%.
The facts are G, returns on PHE have improved since we took over the decisions. The mid 2024 return was 3% and it ended the year +17% ish.
And it's worth contrasting a UNH with just 5 months ago was at a high and now beaten down due to some external factors and today the CEO leaving-who knew that would happen or the prior chap being sh*t. Then America turning on them 'nasty insurers'.
Didn't Terry Smith decry tech as ruining his returns?
Happy to discuss this further with you.
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Complete speculation-the rumour mill at it again. The DOJ routinely investigate insurers.
Medicare Advantage(MA) where UNH bills the government for the healthcare of 8 million policy holders. The investigation will look at overbilling-diagnosing additional illness to gain additional reimbursement . That is the crux of the matter.
It would be highly unusual(but not impossible) for a company like UNH to wilfully commit fraud. If they did they wouldn't tell the market either. So nothing we can do but see how it pans out. We don't sell stocks because of smoke. Cutting the stock in half either way is a material over reaction. It could be an opportunity.
This is why we hold a number of stocks in any one portfolio to mitigate against unknowns. When you invest you rely on information and integrity of management - If they lie to you whilst committing fraud there is no escaping a negative impact-no one can say 'why did you not see it coming' . We can't, obviously.
There is no evidence of fraud or charges being filed. We will have to see how it plays out. It still doesn't justify the reaction-if guilty those responsible will be sanctioned and the company fined. Again whatever that is it doesn't justify a 50% haircut because:
Total Revenue last Q was $85B. MA contributed 30% to this revenue fig and far less to Income. How much could the overbilling be assuming it exists? It could only be relatively small. 5B and with a net 6% margin?. So yes cutting the stock in half makes no sense to me-but that is the current market we are in.
It wasn't long ago that we heard rumours of fraud at SMCI-this turned out to be 100% false. I never believed it because it made no sense and more the point, there was no evidence-none. In this case you had a CEO who held $15B in stock at an all time high but never sold a single share-but he was cooking the books. But the party accusing them was Short the stock and subsequently closed up shop (cashed in and ran)
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whilst we don't disclose specifics. UNH does not stand out as having a particularly high weight-there are several other holdings with materially larger weights.
For the record SMCI, with the exception of Nvidia is the greatest investment we have ever made , with realised gains of 200% in 12 months and unrealised gains on existing holdings of +70%.
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Morning, Air time is driven by:
Weight or our position vs the market position. We were contrarians with SMCI (still are). SMCI drives a lot of opinion!
The significance of the company vs the sector
Companies driving change/innovation (driving news)
My personal interests-and what I think others find interesting-esoteric sectors
Cobens has 20k clients and we managed 3X more assets than IM before the rescueI appreciate that we talk about Tech a lot and a couple of holdings in particular. The fact is Nvidia drives/is a barometer of the wider sector(and the market) and what is good/bad for Nvidia impacts other big names.
