UnitedHealth (NYSE:UNH) is the largest healthcare company in the world by revenue. That may sound pretty impressive, and with 130 million customers, it is. But, remember that most industrialized nations don’t rely on employer-provided healthcare or supplemental Medicare insurance.
So, while the “world’s largest” moniker is impressive, it really means it’s the largest in the United States. And nowadays, it’s hard to figure out if that’s a curse or a blessing.
There’s no doubt that the 2020 election is all about whether the Democrats will actually run a candidate that will support a Medicare-for-all or single-payer system. But even if they do, it’s likely that the U.S. will find a way to keep private insurers in business, simply because they employ so many people. And the transition to a new system would take a while.
Regardless of the details, it’s obvious that something has to be done about the current healthcare situation. The Republican Party has yet to present a plan on how to replace the Affordable Care Act and it doesn’t seem like Congress is doing much of anything about anything. And the president can’t simply sign an executive order changing the entire healthcare system.
All this has caused a certain consternation in the industry.
You see, regardless of what happens, the companies in the healthcare sector simply need a clear understanding of where they stand so they can pursue the most efficient and effective ways to be profitable. As the old saying goes, the markets hate uncertainty. And that is exactly where this sector is right now. There are no ideas and there is no progress, so these stocks sit.
The Bottom Line on UNH Stock
For UNH, a good example is its Optum unit, which was a powerful profit center a couple years ago. This division managed outpatient clinics, had relationships with the major pharmacy benefit managers and was doing deals left and right.
But now, there’s less visibility on how best to grow, and the previous growth isn’t enough to sustain UNH investors’ imagination.
As for UNH stock’s dividend, given all the other sectors that are actually moving in a positive direction and delivering much better dividends — real estate, financials, consumer goods — UNH’s wimpy but rock-solid 1.8% isn’t much to get excited about. It’s not like this dividend has been diminished because the stock has been on fire. For most companies, a rising stock price means a lower dividend yield.
UNH stock is off 2% year-to-date and just over 8% in the past 12 months.
My Portfolio Grader rates UNH stock a “C” at this point. That’s a hold. There are much better sectors that have stronger growth potential. If you own the stock, it’s not going to hurt you, but it’s not going to help you much right now either.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.