Why This Reliable Health Insurance Stock Keeps Rising
Rreceipts and income for UnitedHealth Group (NYSE:UNH) continued to beat its latest earnings report forecast. And although it already serves 100 million customers, the health insurer has room to grow. In this episode of “The Rank” on Motley Fool live, recorded on April 11Fool.com contributors Brian Withers, Matt Frankel and Jason Hall discuss what lies ahead for his action.
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Matt Frankel: Yes. UnitedHealth Group is one of the largest health insurance providers in the world. They operate their business through two main segments. If you’re not familiar, because I know Jason mentioned at the start of the show that he was most surprised about this one, and I’m sure a lot of people are in the same boat.
Jason Hall: It’s not that I was the most surprised, but I think the average person looking at this list would have been the most surprised.
Frankel: Sure. These are the ones that aren’t like the whole growth story you know so well. They have a full range of health benefits under their UnitedHealthcare brand. They do employee and employer in individual coverage, Medicare coverage, community coverage for the economically disadvantaged. Lots of programs like that, and worldwide coverage. They provide plenty of health insurance for people living outside the United States. Between all these things, they have around 50 million members in total. Then they have their subsidiary Optum. That’s really, in my opinion, why it’s worked so well in the past, I think in the main slide, it’s been about 17, 18 years since it’s been there. They have pharmacy services, they have a big analytics business, their customers are hospitals, doctors, and health plans.
Entrance: A hundred million.
Frankel: A hundred million customers. I was getting there. [laughs] They provided health care directly through local providers to 100 million different customers. As you can see, they have done very well over the past year, easily beating the market. It’s good that it’s not a pandemic game, it’s not one that’s been going backwards over the past few months. Their revenues and profits continue to exceed forecasts. Optum continues to do wonders, they are about to make a big acquisition. They have big dividends, buying back a lot of stock. There’s not much not to like about it. It’s the band’s store of value, maybe that’s why I like it so much. I see Brian and Jason both smiling about it. But Jason, what do you think?
Entrance: I don’t know if I would say the value, but it’s definitely a megatrend title because you think about the aging of the American population, the extended lifespan of that aging population. The baby boomers, they will be 80 million in less than a decade and they will live longer than all the previous generations. I think that’s a big trend for a company like UnitedHealth, they have so many things. Its ability to continue to enter international markets as the global middle class grows and people want access to healthcare, and businesses look for things to bring in to be more competitive. Even in the markets, I think we’re seeing more of single-payer controlled or government-mandated health, unless things are done by private companies, I think UnitedHealth has a wonderful future ahead of it. I don’t know if I would call it a value stock I think it’s reasonably priced and probably more antifragile to future government mandates affecting the insurance industry than people may want the to acknowledge. Brian, you placed seventh.
Brian Wither: Yeah I rated it a 7 and part of the reason I rated it lower than you is because I watch this company. I’m listening to you guys talk about all these growth engines and these are all the growth engines that they have and have had, add more members, health care costs go up, go to new areas. I don’t know if there are a ton of options outside of offering health insurance and paying for prescriptions. Matt, you mentioned analytics, but it’s about insurance and health care conditions. It might be a bit naive and it’s not in my wheelhouse, but I think a number of other companies I’ve ranked above will have more options over the next 20 years . If we look at the United Health Group 20 years from now, it’s just going to be a bigger version of what it is today, at least that’s my view.
Brian Withers has no position in the stocks mentioned. Jason Hall has no position in any of the stocks mentioned. Matthew Frankel, CFP® has no position in the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.