President Donald Trump, through his policies and social media platforms, has great influence over the stock market. And his latest attack on the country’s health insurers is worthy of attention. Trump’s Nov. 18 Truth Social post sharply criticized “big, fat, rich insurance companies” and the Affordable Care Act subsidies they receive.
Trump has always wanted to end the Affordable Care Act, or Obamacare. However, the ACA subsidies are currently a contentious issue, as the Marketplace tax credits are set to expire at the end of the year. And Trump seems determined to reject any solution that sends billions to insurance companies to reduce premiums.
UnitedHealth Group (UNH), which is the parent company of the country’s largest health insurer, UnitedHealthcare, saw its shares drop nearly 15% in the last month. Based on the political climate, is UNH stock a buy or a sell right now?
Minnesota-based UnitedHealth Group is a leading healthcare stock operating in the managed care market. Operates both employer and individual accounts, as well as Medicare and Medicaid accounts. It also operates Optum, which provides technology-enabled healthcare services, pharmacy services and data analytics. The company has a market capitalization of $280 billion.
Shares are down 48% over the past 12 months, which is much worse than the 16.5% loss suffered by Cigna Group (CI) and the 23.25% loss by Humana (HUM) in the same period. By comparison, the benchmark S&P 500 index ($SPX) is up 11% over the past year.
www.barchart.com
UNH has a price-to-earnings ratio of 14.9 times, below the industry’s average P/E of 20.7 times. However, its Forward P/E of 19.25 times is higher than the industry average of 18.5 times, indicating that investors anticipate stronger performance next year.
The company’s dividend yield of 2.8% is significantly better than the industry average of 1.5%. UnitedHealth Group’s next dividend of $2.21 per share will be paid on December 16 to shareholders of record as of December 8.
Investors were no doubt relieved when UnitedHealth Group returned to winning ways in its third-quarter report. Because this year it hasn’t been like that at all. UNH stock missed expectations in the first quarter for the first time since the 2008 financial crisis, and followed up with an even deeper miss in the second quarter.
There were several problems: The company accepted new Medicare Advantage patients but miscalculated costs. Management said UnitedHealth Group miscalculated costs by $6.5 billion, hurting the company’s profit margin and deeply cutting into its profits.
On top of that, the Department of Justice launched a criminal investigation into alleged Medicare fraud and billing practices within Medicare Advantage plans. UnitedHealth Group acknowledged the investigation in July and said it would authorize a third-party review of its business practices.
However, after all that, Warren Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) revealed that it took a huge stake in UNH stock, purchasing 5 million shares. It was a classic Buffett buy, considering his appetite for insurance companies and above-average dividend.
And UnitedHealth Group is taking big steps to fix its problems, including premium increases planned for 2026 and 2027, using artificial intelligence to control costs and possibly shrinking some networks.
In the third quarter, UNH reported revenue of $113.2 billion, up 12% from a year ago. Earnings were $4.3 billion, down 47.9% from last year and $2.92 per share, versus analyst expectations of $2.75 per share.
“We remain focused on strengthening performance and positioning for durable, accelerated growth in 2026 and beyond, and our results this quarter reflect strong execution toward that goal,” said CEO Stephen Hemsley. The company raised its full-year guidance from $16 per share to $16.25.
Analysts are bullish on UNH stock, with a consensus rating of “Moderate Buy” over the past few months. Of the 25 analysts currently covering the stock, 17 recommend Buy and only one has a “Sell” rating, with the rest recommending investors Hold.
The average price target of $387.73 represents a 23% upside, and the most bullish analyst target of $440 suggests a 40% gain is possible. However, the low target of $198 warns of a possible 37% drop.
www.barchart.com
However, considering analyst sentiment, the company’s plan to improve its profit margins, and the government’s failure over the past decade to end the Affordable Care Act, which is a politically popular program, I don’t think long-term investors should worry that Trump could hurt health insurers like UnitedHealth Group. I think the stock is a buy.
On the date of publication, Patrick Sanders had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
