Why am I bullish on UNH?
$Unitedhealth(UNH.US) First of all, UNH remains the largest health insurance company in the U.S., boasting unmatched economies of scale. In the insurance industry, scale is the ultimate moat: the more customers a company has, the better it can spread risk, allowing for lower premium pricing, which in turn attracts even more customers. This virtuous cycle forms the foundation of UNH's competitive advantage. Unlike property insurance, health insurance contracts tend to have longer cycles and more stable premiums, giving UNH a more predictable revenue structure.
More importantly, UNH isn’t just a giant sitting on its throne—it’s leading the market with innovative business models. UNH’s two core segments are:
- UnitedHealthcare: The traditional health insurance division, covering a wide population and the one most people are familiar with.
- Optum: This is the segment that I value the most. Simply put, it integrates clinics, pharmacies, and data services, offering an “end-to-end” healthcare solution—providing medical care and selling medicine all in one ecosystem.
On one hand, insurance plans can integrate Optum’s healthcare services, bringing consistent patient flow. This allows Optum to leverage its scale in sourcing medications and medical equipment. Additionally, insurance data helps with decisions around clinic and pharmacy locations and services—for instance, identifying areas with higher patient demand or specific health conditions—reducing healthcare costs.
On the other hand, Optum’s patient data enhances the efficiency of the insurance side. These records help spot high-risk groups and predict healthcare spending trends, optimizing insurance pricing and boosting profits. Since both services belong to the same company, insurance claims processed in-house lead to noticeable cost savings, too. This collaborative model is exactly why I’m so bullish on Optum.
This comprehensive ecosystem not only improves efficiency and reduces costs but also strengthens customer loyalty—a structural advantage that competitors can’t easily replicate.
Insurance rates only get adjusted annually, so when the industry revisits pricing toward the end of 2025, UNH’s profits are likely to steadily recover. As a value investor, it’s not about where the stock will be in six months—it’s about where its valuation will land in two to three years.
So, if you can’t stand waiting for a few quarters, UNH probably isn’t for you. But if you, like me, believe in long-term value and the power of fundamentals over market sentiment, then buckle up—time is an investor’s best friend.
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