UnitedHealth's Share Prices Being Kept Down by Uncertainty (UNH)

 |  About: UnitedHealth Group Inc. (UNH)
by: Jonathan Liss

Following is an excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

Despite Options Probes, UnitedHealth Has Fans

  • Summary: Many institutional investors are now pouring money back into shares of UnitedHealth Group (NYSE:UNH). Currently under investigation for an options scandal that reaches all the way to CEO Dr. William McGuire, shares of UNH are down 25%, from a 52-week high of $64, to their current price of under $48. While the scandal has led to a widespread sell-off in shares of UNH, the stock still has many fans who believe shares are now on offer at a highly discounted price. Glenn Greenberg, managing director of Chieftain Capital Management Inc., which now owns more than 14 million UnitedHealth shares, has channeled 15% of its assets into the stock since it dropped below $50 in April -- buying a total of 1% of UnitedHealth's stock. Other institutional investors are equally bullish on UNH with Citigroup analyst Charles Boorady leading the pack and setting a target price of $81 a share. Shares have hovered around their current price because of uncertainty surrounding CEO McGuire's future at UNH. Many investors attribute McGuire with UNH's rise from troubled, mid-size healthcare provider to the "HMO powerhouse" status it currently holds.
  • Comment on related stocks/ETFs: With UNH expected to report earnings tomorrow, the institutional analysts who are so bullish on UNH should have an immediate litmus test. Regular Seeking Alpha contributor Eddy Elfenbein wrote on July 12 that, "The scandal is serious but it will have little impact on [UNH's] business." If it turns out he's correct and UNH's underlying business is sound, then expect an upside in the near future.