United Health Group Inc. (UNH)

[petekoch]

Originally Posted by nilminih

NPG,
I found this book in a book sale for cheap price "Stocks for the Long Run by Jeremy J. Siegel". Any comments about this book?

It's not exactly a page turner. I read this one years ago, then picked up the 3rd edition about a month back (it's in its 4th edition now) and tried to give it another go. No luck. It's so dry, I was covered with dust after about 80 pages. But it's certainly worth plodding through, if you have the time and the will.

Siegel's an academic and a Wharton academic at that. So SFTLR is certainly complete. But his message is simple: in investing, time is your ally and stocks beat bonds (unless you bought 30 year Treasuries at the beginning of the Reagan administration when rates were flirting with the 20% level).

At the other extreme, I found Mark Skousen's Investing In One Lesson at the public library last Saturday. Read it in an hour. Skousen's message is to buy dividend payers. This ties in with Katzenelson's thesis in Active Value Investing (which I'm currently re-reading) that we're facing a range-bound market, possibly until 2020. And in range-bound markets, dividends account for most of the returns. I'm also waiting for Geraldine Weiss's 1995 work, The Dividend Connection, to be delivered from another branch of the library.

I just pre-ordered David Dreman's latest, Contrarian Investment Strategies: The New Psychological Breakthrough, from Amazon. This one's due out in late March. Dreman is guilty of beating his message to death(mean regression -- buy low PE stocks), but his reasoning is sound.

BTW, there are stock screens mimicking the methods of both Dreman and Weiss on AAII: Unbiased Stock Investing & Personal Finance Education from a Nonprofit Source , if that interests you. Both believe in buying only quality large-caps, so I've built a spreadsheet of the S&P 500 to compile some numbers.

My method is still all about finding undervalued stocks. But no matter which metrics you use (pure Rule#1, DCF, or other methods), valuation is an imprecise undertaking. When trying to look into the future, I like to consider other viewpoints.

I just reread Rappaport and Mauboussin's Expectations Investing. Their thesis is that expectations about a stock are figured into its price. They also have a website with spreadsheets available, but I found that I can accomplish what they do with a couple of VBA instructions. GoalSeek tells me what the Price-Implied-Growth-Rate and Price-Implied-Margin-Rate are at a given price. The real value of the book is in the authors' treatment of Employee Stock Options. BTW, you can get the gist of the book from one of Mauboussin's articles:

http://www.capatcolumbia.com/Article...eresthebar.pdf

But back to SFTLR: npg hit the nail on the head:

"I don't think anyone ever got stupid from reading a book. The more one reads about this topic the better."

[nilminih]

Hi Pete,
Thank you for the information and specially the web address for AAII. I am going to read this book and I believe what NPG said. Reading more will not do any harm to me:). Also I bought this book for $1.50 at a community book sale while I was searching books about Chinese Brush painting.

[quote=petekoch;11510]It's not exactly a page turner. I read this one years ago, then picked up the 3rd edition about a month back (it's in its 4th edition now) and tried to give it another go. No luck. It's so dry, I was covered with dust after about 80 pages. But it's certainly worth plodding through, if you have the time and the will.

[petekoch]

Stocks for the Long Run for $1.50 ??? Now that's undervalued !!!

Originally Posted by npg

"I don't think anyone ever got stupid from reading a book..."

I can think of a few exceptions: most sports books, biographies of certain celebrities, and anything by Al Franken.

[npg]

Originally Posted by nilminih

Also I bought this book for $1.50 at a community book sale while I was searching books about Chinese Brush painting.

Well, that's the spirit!!!

[ladjjd]

I'm curious what anyone is thinking right now of the managed care stocks and UNH in particular given the recent "activity" in the Industry. I'm holding some rather significant positions (relative to my modest portfolio) in UNH. Given my previous analysis the $35 range it is sitting at now is very attractive long-term. I have cash so am really thinking of adding additional positions.

Think I should ignore these short-term downgrades and concerns and look at this as a great buy opportunity (considering I thought $44-$48 was a great buy) as my instincts tell me or I'm I missing something?

[adampepp]

On the discussion of managed care companies..

Wellpoint (WLP) just recently too a massive hit because they lower estimates for the year. They are now down in $45 dollar territory. The reason I would prefer this oner UNH is that Wellpoint has the brand strength of blue cross/blue shield. Wellpoint does not have the balance sheet strength that UNH does, however, and it looks like it might be a few rough years for managed care.

Has anyone else looked into WLP? Also, I feel that political implications to health care are overblown. Besides alot of words, when is the likelyhood that major health care legislation will be passed in a reasonable amount of time?

I look at it this way - do I see HMOs disappearing due to regulation or rising health care costs? Not likely. Which will survive? The largest with the best networks (moat item for UNH and WLP) and BRAND (WLP has the winner on this one). People will always need health care, and government healthcare for all is probably a long ways off.

Adam

[npg]

WLP is oversold. You are right in your assessment that the drop is disproportionate to the reduced earnings they expect.

Looks like a pretty solid investment at that price.

Now you need to figure the kind of returns WLP is expected to yield. I kinda got them round the 12% mark.

[joshuat]

Bruce Berkowitz (a buffett-like money manager) was just on CNBC touting Wellcare as an example. His argument was simple - none of us are getting younger, we are going to need these services, coupled with looking at free cash flow, which is the only way to grow the business. Wellcare, for example, has 4.82 FCF on a price of 39. Pretty yummy.

UNH has 3.48 on 34. WLP has 5.23 on 45. Those are all great ratios.

[Basmts]

UNH has a lot going for it....All the growth rates have been strong over the past 3,5,10 years.....It is near/at its 50 percent MOS. Buffett is an owner....Morningstar gives the stock a 5 star rating (recommends buying at any price below $45)....the MACD, Simple Moving Average, and Slow Stochastic charts are all approaching buy points....

From what I can see things point to this being a good time to buy into UNH.

[Stockowner]

Current price 33 dollars. Not a bad price.