Ruane Cunniff Comments on UnitedHealth Group
UnitedHealth Group ((NYSE:UN)H) had a solid year despite some COVID-related volatility, with total revenues growing 6% and earnings per share growing 12%. The COVID pandemic affected UnitedHealth‘s operations in a couple of notable ways. First, the COVID-related spike in unemployment led to a decline in UnitedHealth‘s commercial covered lives; though an increase in Medicare and Medicaid lives along with healthcare inflation helped propel insurance revenues higher. Second, the company’s health, prescription, and tech services business, Optum, saw a material acceleration in growth thanks to an expansion of people served in value-based care arrangements and rising home infusion services and specialty pharmacy drug spend.
Like TSM, UnitedHealth entered the year at a relatively small weight in Sequoia’s portfolio. A dip in late January provided an initial opportunity to add to our investment below $290 per share, and the dramatic decline in mid-March provided another opportunity below $240 per share.Today, UnitedHealth trades at a below-market multiple of our 2021 earnings estimate, which we believe represents good value given our expectation for double digit earnings growth in the years ahead.
From Ruane Cunniff (Trades, Portfolio)’s Sequoia Fund 2020 annual report.
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