[adampepp]

Using a DCF analysis, assuming a VERY conservative 6% increase in FCF for the next 10 years, then 3% for 10-20, discounted at 15%, then UNH has a sticker value of $46/share, or a MOS of $23/share (right where we are now).

Since I like to model worst case scenarios, even if UNH didn't grow at all in the next 10 years, their shares would still be worth $39. UNH would have to DECREASE FCF by about 17% for the next 10 years for the shares to be worth $23, and thats still assuming a 15% discount rate.

Anyhow, lets assume the most likely possibility that they grow FCF at 6%. A DCF analysis, Graham analysis, Phil Town analysis, and Morningstar, they all put the fair value in the $46-$56 range, which gives me a lot of confidence that the valuation is correct and we are really buying $0.50 for $1.00.

Adam