To The Moon

1/ $UnitedHealth(UNH)$ is one of my highest conviction stocks for the next 5 years. It is an easy 3x from the current levels. Here is why UNH is an asymmetric opportunity now: 🧵 2/ $UnitedHealth(UNH)$ is dominating healthcare in the US. As a group, UnitedHealth owns: - Largest health insurer in the US - Largest care delivery network - Largest pharmacy benefit manager These businesses are integrated under one roof, making it a vertically integrated giant. Image 3/ Its vertical integration allows it to keep more money in the system compared to the competitors. Clients pay policy premiums to UnitedHealthcare. When they need health services, they primarily use Optum. UnitedHealthcare pays Optum, thus UNH group avoids premiums that would be charged by third-party providers. This is an important source of operating leverage. Image 4/ Optum also generates significant external revenue. Not just UnitedHealthcare, but many other insurers also use Optum's care network. As a result, Optum has been UnitedHealth's growth driver for years. It grew revenues 17% annually from 2020 to 2024: Image 5/ UnitedHealthcare's vertical integration with Optum worked extremely well for $UNH. At the group level, it grew revenues 11% annually in the last 5 years. Given its size, this is an extremely satisfactory growth rate. Yet, the stock got hammered by 40%... Here is why: Image 6/ It's because of poor business execution. Medical costs rose faster than $UNH estimates since Q3 2023. This led $UNH to underbid for future plans. Result? Growth took a hit. Image 7/ Yet, this could be easily fixed. $UnitedHealth(UNH)$ has historically had a superior underwriting performance. Before Q3, its cost estimates were conservatively high, leading to conservative underwriting. This indicates that its problems are not structural. It can easily get back to growth by bidding up and tightening its actuarials. Image 8/ Compliance concerns also dragged the stock down. The murder of the CEO of its insurance arm triggered an intense media scrutiny over its businesses. WSJ has come out with several articles accusing UNH of fraud. Yet, most of these were old allegations that UNH got exonerated from. Yet, the stain stuck. Image 9/ Despite all the pessimism surrounding the business, it has secular tailwinds for sustained growth. Americans now pay more for healthcare than for groceries or housing. This will only increase as the population is aging rapidly. $UnitedHealth(UNH)$ will massively benefit from this. Image 10/ Probability is on your side. Monte Carlo analysis by based on history and probability of each fine in the healthcare system shows that even a 10th percentile price target offers 20% upside from the current levels. - Odds of which way the DOJ/Gov will go with it ($0 to $2B in fines) - EPS growth assumptions (+5% +-2%) - Historical P/E reversion mean = 17x, std dev =2 Image 11/ I think UNH can easily do better. Even assuming no growth this year, and just 15% EPS growth annually for the next 4 years, we will get $48 EPS in 2030. Slap a median 17 times earnings, and we have $816 price target for the end year 2030. This is nearly 3 times today's price, promising a 24% annualized return. I don't know about you, but this is extremely attractive to me. For whom haven't open CBA can know more from below: 🏦 Open a CBA today and enjoy privileges of up to SGD 20,000 in trading limit with 0 commission. Trade SG, HK, US stocks as well as ETFs unlimitedly! Find out more here： Trade on a Cash Boost Account and enjoy up to 6 months of Commission-Free trading. 💰Join the TB Contra Telegram Group to Get $10 Trading Vouchers Now🎉 💰CBA Mini Course 1: What is Cash Boost Account(CBA)?