1Settimana·

Why UNH can be a trap.

$UNH (+2,83%) currently a community favorite, but for what reason?

Probably simply in the hope of a rebound, according to the motto too big not to get healthy again. First of all, I would like to $AIG (+2,85%) to the heart.

That said, I asked myself: What is the worst-case scenario and how expensive would the share be then?

If you look around, you quickly notice something. The RX business. The RX business is highly controversial and since Donald wants to cut costs, everyone is pointing the finger at it. In short, the PBM sector. And rightly so, but unfortunately for all US insurers, because the business brings in a 4% margin and $6 billion, at least at UNH. If we assume that the business were to disappear completely, even though there is a little more there, the share price would fall significantly again. Short beer calculation. PE 11, RX LTM 6 bn, precautionary measures on transfer we take 5 bn into net profit, the result is 21,296-5=16,296. 16,296*11=179,256 bn market capitalization, that is 20% minus from the present time. If you convert that into euros, it's 25% and €160 per share. Of course the calculation is a beer calculation but be aware of the downside. The upside is not too high for the risk involved.

17 Commenti

Michael@Neverloosemoney

1Settimana

As always, exaggerations in both directions, the trick is to strike at the right time

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K@TechNav

1Settimana

I don't believe in a bounce-back of shares for precisely these reasons. When something falls so sharply, large investors and institutional investors have usually already exited. They have recognized or calculated something that small investors often don't even see under their noses. P.S The same applies to $NOVO B

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MC@Tokugawa

1Settimana

@TechNav oh yes, the great institutional investors...who all outperform the market 🤣🤣. Kostolany's description of the hypes is still the best.... up and down...

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Ph1l1pp@Ph1l1pp

1Settimana

UNH was overvalued by analysts, earnings manipulation, massively rising costs in the sector, competition from service providers with a "low cost offer"

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Michael@Neverloosemoney

1Settimana

But while we're on the subject of overvaluations. The big 7 techs also have too high a level... ;-)

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Tenbagger2024@Tenbagger2024

1Settimana

In the worst case, nationalize 🍊 the entire health insurance companies 🙈😂

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ThemenmitKopf@topicswithhead

1Settimana

@Tenbagger2024 no, probably not, but forced takeovers would then be possible. If things get worse for them, consolidation will probably be easier for the authorities, so they will probably buy big in the long term.

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ThemenmitKopf@topicswithhead

1Settimana

@Tenbagger2024 what do you say to the base report. Fits in with your Coinbase position

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Jason M.@JasonMcMillen

$UNH has a market cap of 200 billion and a turnover of 400 billion and is the largest employer in the USA. the 6 billion is priced in. they have insurance contracts for years, most of them don't want to change their health insurance back and forth but stay with AOK or TK for 40 years in Germany, for example. The insurance company you have shown did not recover after 2009, there are always companies that do not come up quickly in such times, Goldman Sachs one of the largest investment banks was said to be dead for years until they recovered after years. The upside is easily over 320$ or the original 500$ for 3-5 years. the health care system will not change fundamentally, even in 50 years Americans will have to buy private insurance.

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ThemenmitKopf@topicswithhead

@JasonMcMillen your argument is: it's big, something is priced in, in Germany you don't change your insurance, so in the USA it's the same, Goldmann Sachs comparison, upside is easily 500$, everyone has to insure themselves. Stable basis and good response to my text. Apart from that, I didn't say the company was dead but the share price

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Soprano@Soprano

It can actually be boiled down to this: shares can rise or fall. A downside potential down to 0 is basically possible for any company. What you say is correct in principle, but that is exactly what sensible investors see and weight the share moderately.

But precisely the point that the upside is not great is not true. The upside could be 10-30% p.a. by 2030. But it could also be -10% p.a., as you warn. The question of what is more likely cannot yet be calculated mathematically, but can only be justified by logical, legal and psychological arguments.

However, the comparison with AIG is nonsensical. During the financial crisis, the company took part in speculation that was a one-way ticket to bankruptcy, either through greed or stupidity. You can't equate every problem with a company with every problem with a company. Some have falsified balance sheets, some have operational problems, some have regulatory problems, some have bet everything on red and lost, and some are simply run into the ground rhetorically without anything tangible having actually happened.

You also have companies that don't do well. It doesn't help anyone if this is indiscriminately compared with the glyphosate deals of Bayer, fraud at Wirecard and Enron and the disruption of Kodak and Nokia, without there being any recognizable parallels.

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ThemenmitKopf@topicswithhead

@Soprano It's not about the case of AIG. It's about the fact that in the end you had to wait a long time to see anything again. The business is not that different. And of course an expected value can be calculated. You take the history, the current guidance and the accuracy of the forecasts. Even with the current forecast, you don't see the huge return. This is also completely understandable, because Inssurane is extremely stable on the upside. Assuming that the PBM business remains and the actual guidance can be maintained, the bull case is 10-14%, which also holds up with the 11-16 EPS guidance (long term). If the best case can just beat the market trend, then hats off. 16 would actually be very good 11% then again not, because return must be seen with the risk. The mid case is just absolutely mid and the worst case is almost zero returns for years. Either way, it is simply questionable how something like this can happen in such a data-rich and conservative business. In short, return risk is not very worthwhile right now, at least as long as there is a risk that the PBM business could be attacked

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ThemenmitKopf@topicswithhead

@Soprano If you're looking for undervaluation and good cash flow, you're better off with $HHH. It is extremely complicated but fundamentally has an extremely exciting business, especially now with Bill Ackman

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ThemenmitKopf@topicswithhead

@Soprano and of course I have shares that have crashed completely. But for completely different reasons and, above all, the trend is behind it. So maybe in the end I just picked the wrong company. With health insurance, everyone was hit at the same time. Something has happened in the market or something is fundamentally wrong in the market. At the same time, this is a highly sensitive market. Slumps can't simply be made up for, you burn out once and then business is back to normal, at best.

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Soprano@Soprano

@topicswithhead But it's actually interesting when the entire industry is being dismantled. That means either something fundamental has happened - or there's just panic.

For me, there are actually few reasons to sell. Either because I don't trust the management (easy to assess), because the business model no longer works or is too uncertain (moderately difficult to assess) or because there is a disruption (very difficult to assess, e.g. Intel).

As you can see from my profile, I rarely sell anything. I usually stick to my decisions.

PS. Why should catching up work differently for this market than for others?

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ThemenmitKopf@topicswithhead

@Soprano you think of consolidation when the industry fails, but as long as they don't go bankrupt, very little happens. Fail does not necessarily mean insolvency, but can also simply mean a few years of restructuring and close to break even or losses. I find it hard to imagine that CVS and co will be merged. The smaller ones make little difference to someone like UNH. Why can't the industry simply recoup profits from before? You can't just overprice. Just because you have fed 5% incorrectly, you don't reprice 11%. In such an industry you get a profit hit and the new risk rate is simply repriced. In this case, it would be 5-7. Firstly, things would be unaffordable and, at least internationally, the authorities would intervene. Maybe it could work under Trump. In short, incorrect pricing is at your own risk and then you are simply set to zero, so to speak. In the example here, you would have to hold on until 2030 to get back to €500, assuming things continue as normal in 2026. If that doesn't happen, it shifts further back. This is actually the principle of an insurer.

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ThemenmitKopf@topicswithhead

@Soprano No reason to sell? I think so. There are opportunities that simply offer a better sharp ratio. If I have the chance to make 100% in 5-7 years, why should I do that with a risk of 10 when there are stocks that have 6. There are many stocks that have been stuck for a long time at the moment, although fundamentally things have moved on.

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