I noticed you changed your sentiment from "Buy" to "Hold".
As if anyone would really pay attention to it!
I am always right on this sector. CI is only good long buy right now. Valuations for whole sector coming down starting with UNH.
An 18 PE too high??? How long have you been trading? Check PHS 16 too high too? What about PEG?
Amazing how you can micro analyze without considering all the facts. Short interest has increased and this too will help in any rally. UNH is a strong stock which gave us a Great buying oppotunity earlier this week due to Spitzer/Brown.
Agree, but most of their high profit margins (and resulting high valuation) has come from their huge small group block with runs best in class medical expense ratios.
IMHO they cannot sustain these margins which will cause this valuation to fall back in line with peers at some time.
Also, all of the risk factors I cited in previous post will pressure margins and may cause UNH to change business practices. Ultra high PE not warrented.
Next largest competitor WLP is at 12.3 PE ditto for the rest. UNH is at 18.65. Way overvalued.
MSM Scottrader rating system which is reflects analysts ratings shows a 9 out of 10. One of the highest ratings. Did you have a difficult time finding the two worst ratings? This is one of the highest rated stocks by Schwabs rating program.
Unfortunately some brokerage downgraded HMOs today which will bring the sector down.
Investors are influenced by the big names in stock evaluation. S&P decreased their target for the next 12 months from 85 to 71 which is barely above its current price. Morningstar gives the company a fair value of 56 and encourages buyers at 43.20. They give it a two star rating which is a weak hold. How can the company have any upside potential in this environment?
You are wrong in some of your observations. Fundamentally, UNH is an insurer with the power to control its claims! Its fee premium structure is designed based on sound actuarial principles. Most of the items you call "uncertainty" are natural parts of a business like UNH and has already been accounted for / priced in any contract they sign.
P.S. The current turbulence is baseless and will clear in no time. Mutual Fund scandal was for real and even didn�t get anywhere beyond a few $mm fines.
My facts/opinions are this:
UNH HAS been a great investment over the years.
However, their profit margins and growth are driving their valuation. IMHO they are not sustainable. My reasons are new legal risk factors, flu season, flat industry organic growth, uncertainty of merger integration for OHP deal, uncertainty to grow through acquisitions in the future due to WLP/ATH "concession" issue, unknown impact of Blue Cross over reserve issue, uncertainty related to the impact of consumer directed health plans which I believe will reduce profit margins, gut good business leaving only low margin major medical plans.(not the high margin plans they currently have which drives the valuation)
Bottom line, too much uncertainty to justify high current PE or forward PE (which I hardly ever use unless a new growth company).
S&P already dropped one star.
Better investment choices available.