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We have Ipods, Ipads, ARods, KRods, Clouds, Facebooks and Twitter. Now I don’t know about any of this stuff, but what I do know is that since people were cavemen, they always got sick. For as long as people were sick, there were people who felt that they knew how to make them well. First there were witchdoctors, now there is Obamacare. Now I don’t know if evolution is going in the right direction, but I do know there is a way to make a buck off of all of this.
Today I bought UNH (UnitedHealth Group Incorporated) at 52.08. I will sell it in 4 to 6 weeks at 59.99. Here’s why I like UNH.
Take a look at this lovely chart:
UNH stock price is up 70% in the last 52 weeks. That’s a tidy return in a very turbulent environment. The ascension of this stock price has been slow and steady. Even though shares are trading near the 52-week high, the valuations are still attractive. In addition to its low P/E, UnitedHealth has a price-to-book ratio of only 2.0, which is well under the 3.0 cut-off for a value stock. It also has a low price-to-sales (P/S) ratio of just 0.6. A P/S ratio under 1.0 usually indicates value. Additionally, shareholders are also rewarded with a dividend yielding 1.0%. Try getting that from your savings account. All in all this is a pretty good deal for this earnings engine.
UnitedHealth Group Incorporated provides healthcare services in the United States. UnitedHealth Group offers a broad spectrum of products and services through two distinct platforms: UnitedHealthcare, which provides health care coverage and benefits services; and Optum, which provides information and technology-enabled health services. Its Health Benefits segment offers consumer-oriented health benefit plans and services to national employers, public sector employers, mid-sized employers, small businesses, and individuals; and non-employer based insurance options for purchase by individuals. It also provides health and well-being services for individuals aged 50 and older; and for services dealing with chronic disease and other specialized issues for older individuals, as well as health plans for the beneficiaries of acute and long-term care Medicaid plans. This segment offers its services through a network of 730,000 physicians and other health care professionals, and 5,300 hospitals. The company was founded in 1974 and is based in Minnetonka, Minnesota. (One of my least favorite wrestlers was Tatonka.)
Over 250 million people had health insurance coverage in 2009. National managed care enrollment in 2010 was 135 million. Managed care still has good growth prospects among the uninsured, Medicare and Medicaid populations. With more than 1,000 managed care organizations operating in the U.S. the health plan market is fragmented. UNH is ranked number two in enrollment. In the last five years through 2010, UNH has increased its health plan enrollment by 7% per year while growing its revenue by 16% per year. To the winners go the spoils. Size does matter in this business. Its scale, IT services capabilities and cash flow should enable it to manage better than most peers amid health care reform. UNH has been, and will be, a consolidator as the smaller guys weaken.
There will be continued membership gains as people start getting back to work and as the Medicare population increases and Medicaid recipients switch to managed care programs.
UNH generates mad amounts of cash to fund acquisitions. With its scale, they are positioned to rob market share from the hundreds of smaller rivals that may not be able to survive in the new health-care environment. The healthcare industry is going to be the focus of a lot of governmental regulation and larger companies have the staff to negotiate those hurdles much better than the smaller players.
How big is United? With a name like United, how could it be small? Its market capitalization is $56,089,560,000. Its revenue for the most recent fiscal year was $94,155,000,000 Health-care companies will face a future in which the government and insurers will be tightening their belts in regards to health-care funding. The small guys will get the squeeze. Health-care spending in the U.S. could increase by $3 trillion in the next ten years, so even with its huge scale, UNH is poised, and still has room, to grow in this fertile landscape.
Financially speaking, UnitedHealth Group looks decent on paper. It produced a nice ROE of 19% and grew its operations reasonably well over the past five years. It has a conservative capital structure with Total Debt / Equity of only 44%. In looking at pricing, only UnitedHealth looks really cheap with Enterprise Value / FCF of only 10.
Starting this year, insurers must meet minimum medical-loss ratios or issue rebates to customers. The new rule governing so-called MLRs aims to ensure that a good portion of the premiums an insurer collects goes toward care and not profits or big salaries. But the regulation had worried insurance investors and ANAL-ysts because it essentially regulates company profits. Understanding these MLR floor levels provides a huge planning advantage for the companies with the scale of UNH. In the first quarter of this year, UNH’s earnings beat the ANAL-ysts estimates by 37%. You think they have a handle on things…ya think??
On April 21, UNH reported its first quarter results and saw sales rise 10% to $25.4 billion. UnitedHealth added 1.2 million people to their scrolls in the quarter. Earnings were $1.22 compared to the ANAL-ysts consensus of just 89 cents. Operating margin widened to 8% from 7.7%. This was the 9th consecutive earnings surprise…when do you think they’re gonna get it?
The ANAL-ysts are projecting earnings of $4.17/share on sales of $101.49 billion. Lucy..don’t be ridiculous. The company already admitted it sees increasing demand. $$$MR. MARKET$$$ projects that revenues will actually be $103.4 billion which will, with the widening operating margins, generate EPS of $5.12/share. If you take these earnings and multiply it by the PE ration of 12, you get as share price of: $5.12 x 12 = $61.44…and don’t forget to collect your dividend along the way!
Here’s what the boss, Stephen Hemsley (no not Sherman Helmsley) had to say:
“We are pleased to report that the company’s positive momentum from 2009 and 2010 is carrying over to 2011 and continues to advance steadily and broadly. The people of UnitedHealth Group are delivering consistent performance; solid fundamental execution and practical innovation on behalf of the people we serve and for the advancement of the health care system itself.
We are increasingly recognized for the quality of our service and the affordability
and value we deliver. The ultimate proof of this effort comes from the strong growth and positive marketplace response we have realized. In response to the greater than anticipated growth across virtually all of our businesses, in April, we increased our performance outlook for 2011 revenue growth and earnings. Our businesses generate significant cash flow annually. In the last year, we established a meaningful shareholder dividend, while maintaining our share repurchase program. We continue to increase our investments in technology and innovation and remain active in business expansions, all of which strengthens both our health services and health benefits businesses. We are managing our capital position to sustain strong levels of regulated capital, as well as overall balance sheet strength and flexibility. Our portfolio of products and services is growing strongly. And the products and services we bring to market are more affordable in how they are designed and delivered and – importantly – in how they perform for our customers. We are driving higher clinical access and quality, better information and connectivity and more affordable care and care delivery. We have become more flexible and innovative in our products, services and approaches, and we’re getting better at combining our capabilities in practical ways to meet specific customer and market needs. We are developing new ways to serve our markets in new venues. Today, we can be found in retail settings, social networks, mobile applications, delivered through clouds and through Internet connectivity, imbedded in alliances and associations, and from inside care provider systems and care settings, as well as delivered through consultants, brokers and agents serving the spectrum of market segments.”
Wouldn’t that be funny if their CEO was actually Sherman Helmsley from the Jeffersons?
So it looks they are MOVIN ON UP!
Well we're movin on up,
To the east side.
To a deluxe apartment in the sky.
Movin on up
To the east side.
We finally got a piece of the pie.
Fish don't fry in the kitchen;
Beans don't burn on the grill.
Took a whole lotta tryin'
Just to get up that hill.
Now we're up in the big leagues
Gettin' our turn at bat.
As long as we live, it's you and me baby
There ain't nothin wrong with that.
Well we're movin on up,
To the east side.
To a deluxe apartment in the sky.
Movin on up
To the east side.
We finally got a piece of the pie.
Let me know if you liked this stock and this write up…if yes, there will surely be more to come! Don’t forget to share with a friend.
I am HUGE!!
$$$MR. MARKET$$$
www.mrmarketishuge.com
Today I bought UNH (UnitedHealth Group Incorporated) at 52.08. I will sell it in 4 to 6 weeks at 59.99. Here’s why I like UNH.
Take a look at this lovely chart:
UNH stock price is up 70% in the last 52 weeks. That’s a tidy return in a very turbulent environment. The ascension of this stock price has been slow and steady. Even though shares are trading near the 52-week high, the valuations are still attractive. In addition to its low P/E, UnitedHealth has a price-to-book ratio of only 2.0, which is well under the 3.0 cut-off for a value stock. It also has a low price-to-sales (P/S) ratio of just 0.6. A P/S ratio under 1.0 usually indicates value. Additionally, shareholders are also rewarded with a dividend yielding 1.0%. Try getting that from your savings account. All in all this is a pretty good deal for this earnings engine.
UnitedHealth Group Incorporated provides healthcare services in the United States. UnitedHealth Group offers a broad spectrum of products and services through two distinct platforms: UnitedHealthcare, which provides health care coverage and benefits services; and Optum, which provides information and technology-enabled health services. Its Health Benefits segment offers consumer-oriented health benefit plans and services to national employers, public sector employers, mid-sized employers, small businesses, and individuals; and non-employer based insurance options for purchase by individuals. It also provides health and well-being services for individuals aged 50 and older; and for services dealing with chronic disease and other specialized issues for older individuals, as well as health plans for the beneficiaries of acute and long-term care Medicaid plans. This segment offers its services through a network of 730,000 physicians and other health care professionals, and 5,300 hospitals. The company was founded in 1974 and is based in Minnetonka, Minnesota. (One of my least favorite wrestlers was Tatonka.)
Over 250 million people had health insurance coverage in 2009. National managed care enrollment in 2010 was 135 million. Managed care still has good growth prospects among the uninsured, Medicare and Medicaid populations. With more than 1,000 managed care organizations operating in the U.S. the health plan market is fragmented. UNH is ranked number two in enrollment. In the last five years through 2010, UNH has increased its health plan enrollment by 7% per year while growing its revenue by 16% per year. To the winners go the spoils. Size does matter in this business. Its scale, IT services capabilities and cash flow should enable it to manage better than most peers amid health care reform. UNH has been, and will be, a consolidator as the smaller guys weaken.
There will be continued membership gains as people start getting back to work and as the Medicare population increases and Medicaid recipients switch to managed care programs.
UNH generates mad amounts of cash to fund acquisitions. With its scale, they are positioned to rob market share from the hundreds of smaller rivals that may not be able to survive in the new health-care environment. The healthcare industry is going to be the focus of a lot of governmental regulation and larger companies have the staff to negotiate those hurdles much better than the smaller players.
How big is United? With a name like United, how could it be small? Its market capitalization is $56,089,560,000. Its revenue for the most recent fiscal year was $94,155,000,000 Health-care companies will face a future in which the government and insurers will be tightening their belts in regards to health-care funding. The small guys will get the squeeze. Health-care spending in the U.S. could increase by $3 trillion in the next ten years, so even with its huge scale, UNH is poised, and still has room, to grow in this fertile landscape.
Financially speaking, UnitedHealth Group looks decent on paper. It produced a nice ROE of 19% and grew its operations reasonably well over the past five years. It has a conservative capital structure with Total Debt / Equity of only 44%. In looking at pricing, only UnitedHealth looks really cheap with Enterprise Value / FCF of only 10.
Starting this year, insurers must meet minimum medical-loss ratios or issue rebates to customers. The new rule governing so-called MLRs aims to ensure that a good portion of the premiums an insurer collects goes toward care and not profits or big salaries. But the regulation had worried insurance investors and ANAL-ysts because it essentially regulates company profits. Understanding these MLR floor levels provides a huge planning advantage for the companies with the scale of UNH. In the first quarter of this year, UNH’s earnings beat the ANAL-ysts estimates by 37%. You think they have a handle on things…ya think??
On April 21, UNH reported its first quarter results and saw sales rise 10% to $25.4 billion. UnitedHealth added 1.2 million people to their scrolls in the quarter. Earnings were $1.22 compared to the ANAL-ysts consensus of just 89 cents. Operating margin widened to 8% from 7.7%. This was the 9th consecutive earnings surprise…when do you think they’re gonna get it?
The ANAL-ysts are projecting earnings of $4.17/share on sales of $101.49 billion. Lucy..don’t be ridiculous. The company already admitted it sees increasing demand. $$$MR. MARKET$$$ projects that revenues will actually be $103.4 billion which will, with the widening operating margins, generate EPS of $5.12/share. If you take these earnings and multiply it by the PE ration of 12, you get as share price of: $5.12 x 12 = $61.44…and don’t forget to collect your dividend along the way!
Here’s what the boss, Stephen Hemsley (no not Sherman Helmsley) had to say:
“We are pleased to report that the company’s positive momentum from 2009 and 2010 is carrying over to 2011 and continues to advance steadily and broadly. The people of UnitedHealth Group are delivering consistent performance; solid fundamental execution and practical innovation on behalf of the people we serve and for the advancement of the health care system itself.
We are increasingly recognized for the quality of our service and the affordability
and value we deliver. The ultimate proof of this effort comes from the strong growth and positive marketplace response we have realized. In response to the greater than anticipated growth across virtually all of our businesses, in April, we increased our performance outlook for 2011 revenue growth and earnings. Our businesses generate significant cash flow annually. In the last year, we established a meaningful shareholder dividend, while maintaining our share repurchase program. We continue to increase our investments in technology and innovation and remain active in business expansions, all of which strengthens both our health services and health benefits businesses. We are managing our capital position to sustain strong levels of regulated capital, as well as overall balance sheet strength and flexibility. Our portfolio of products and services is growing strongly. And the products and services we bring to market are more affordable in how they are designed and delivered and – importantly – in how they perform for our customers. We are driving higher clinical access and quality, better information and connectivity and more affordable care and care delivery. We have become more flexible and innovative in our products, services and approaches, and we’re getting better at combining our capabilities in practical ways to meet specific customer and market needs. We are developing new ways to serve our markets in new venues. Today, we can be found in retail settings, social networks, mobile applications, delivered through clouds and through Internet connectivity, imbedded in alliances and associations, and from inside care provider systems and care settings, as well as delivered through consultants, brokers and agents serving the spectrum of market segments.”
Wouldn’t that be funny if their CEO was actually Sherman Helmsley from the Jeffersons?
So it looks they are MOVIN ON UP!
Well we're movin on up,
To the east side.
To a deluxe apartment in the sky.
Movin on up
To the east side.
We finally got a piece of the pie.
Fish don't fry in the kitchen;
Beans don't burn on the grill.
Took a whole lotta tryin'
Just to get up that hill.
Now we're up in the big leagues
Gettin' our turn at bat.
As long as we live, it's you and me baby
There ain't nothin wrong with that.
Well we're movin on up,
To the east side.
To a deluxe apartment in the sky.
Movin on up
To the east side.
We finally got a piece of the pie.
Let me know if you liked this stock and this write up…if yes, there will surely be more to come! Don’t forget to share with a friend.
I am HUGE!!
$$$MR. MARKET$$$
www.mrmarketishuge.com
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