TLDR
- UnitedHealth Group (UNH) stock surged 5.41% on Tuesday amid a broader market decline
- Medicare Advantage payments will increase by 5.06% to $25 billion next year, double the initially proposed 2.2% hike
- Ken Fisher includes UNH in his defensive stock picks with a beta value of 0.52
- Fisher Asset Management held a $1.73 billion stake in UNH as of Q4 2024
- Dr. Mehmet Oz was recently confirmed to oversee Medicare and Medicaid
UnitedHealth Group saw its shares jump 5.41% on Tuesday, closing at $28.38 while major market indices fell sharply. The healthcare giant’s stock rallied after the government announced a larger than expected increase in Medicare Advantage payments for the coming year.
The Centers for Medicare & Medicaid Services (CMS) revealed plans to boost Medicare Advantage payments by 5.06% to $25 billion in 2026. This figure was more than double the 2.2% increase initially proposed in January.
The announcement provided welcome relief for healthcare insurers who have been struggling with rising medical costs. UNH was among just ten companies that gained ground during Tuesday’s market retreat.
The broader market experienced heavy losses as investors reacted to President Donald Trump’s latest tariff threats against China. The tech-heavy Nasdaq fell 2.15%, the S&P 500 dropped 1.57%, and the Dow Jones declined 0.84%.
A Defensive Play in Volatile Markets
UnitedHealth Group has caught the attention of billionaire investor Ken Fisher, who includes it among his defensive stock picks. Fisher Asset Management held a $1.73 billion stake in UNH as of the fourth quarter of 2024.
With a beta value of just 0.52, UnitedHealth offers less volatility than the overall market. The company also provides a dividend yield of 1.60%, making it attractive to income-focused investors.
Fisher, known for his contrarian approach and data-driven value mindset, has recently suggested that value stocks may outperform growth stocks this year. His investment philosophy combines growth principles with an emphasis on metrics like Price/Sales ratios to identify potential bargains.
UNH’s relatively low beta makes it a stable option during market turbulence. This stability was on display Tuesday as the stock climbed while most others fell.
The healthcare giant’s business spans four key segments: UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx. This diversified structure helps insulate the company from some market pressures.
Strong Financial Performance
UnitedHealth posted impressive results for fiscal year 2024, exceeding market expectations. Revenue grew by 8% to $400 billion, driven by broad expansion across its service offerings.
During 2024, the company returned more than $16 billion to shareholders through dividends and stock buybacks. This commitment to shareholder returns has helped maintain investor confidence.
Cantor Fitzgerald recently reaffirmed its Overweight rating on UNH with a price target of $700. Analyst Sarah James expressed confidence in UnitedHealth’s performance, predicting it will exceed its 2025 estimate.
James expects the company’s financial projections will be revised upward later this year, likely in the second or third quarter rather than the first. This optimistic outlook has further fueled investor interest.
Vulcan Value Partners, another investment firm with a position in UNH, praised the company in its recent investor letter. They highlighted UnitedHealth’s powerful network effects, noting that “more members attract more providers and vice versa.”
The environment for health insurance remains positive as healthcare spending continues to outpace overall economic growth. An aging population and increasing prevalence of chronic diseases are driving factors in this trend.
In a related development, the US Senate recently confirmed Dr. Mehmet Oz to oversee Medicare and Medicaid. The celebrity physician was nominated by President Donald Trump to lead these critical healthcare programs.
This leadership change at CMS could have implications for healthcare insurers like UnitedHealth, though the specific impact remains to be seen. For now, investors seem pleased with the direction of Medicare Advantage payment increases.
As market volatility continues, UnitedHealth’s defensive characteristics may attract more attention from investors seeking shelter from turbulence. The stock’s performance on Tuesday demonstrated its ability to swim against the current during broad market downturns.
UnitedHealth Group’s position as the largest health insurer in the United States gives it substantial market influence. This scale, combined with its growing Optum healthcare services division, provides multiple avenues for continued growth.
