UnitedHealth Group Faces Turbulent Times

June 16, 2025 – UnitedHealth Group Inc. is experiencing significant challenges. Recently, the company mourned the loss of one of its top executives who was shot, its CEO resigned for personal reasons, and the federal government is probing its claims practices.

Despite all this turmoil, five executives, including CEO Stephen Hemsley, have recently bought shares in the company. It seems they don’t believe disaster is imminent.

The amount of negative news surrounding UnitedHealth this year is quite striking.

Here’s a brief timeline of notable events that have impacted the company over the last six months:

• On December 4, 2024, Brian Thompson, CEO of UnitedHealthcare, was fatally shot. UnitedHealthcare is the largest part of the company’s insurance division.
• Just a few days later, police arrested 26-year-old Luigi Mangionne, a University of Pennsylvania graduate with a master’s degree in computer science. The crime scene had shell casings linked to terms like delay, denial, and retirement.
• Many people expressed their dissatisfaction not just towards the shooting but also towards insurance companies.
• On May 13, Andrew Witty announced his resignation as CEO, citing personal reasons.
• The following day, news broke from the Wall Street Journal that the U.S. Department of Justice was investigating the firm for potential job fraud, though the company maintained it had not been informed about the investigation.
• Over the recent months, stock prices fell dramatically, decreasing from over $600 to about $313.

In a surprising move on May 16, Hemsley made headlines by purchasing 86,700 shares for $25 million, marking the most substantial acquisition in May and June. Having previously served as CEO from 2006 to 2017, he resumed his role in May after Witty stepped down. Post-purchase, Hemsley now holds 1,112,339 shares, valued around $349 million based on the closing price of $313.53 on June 13.

Additionally, John Rex, the company’s president and CFO, invested nearly $5 million on the same day to increase his holdings. Two other executives, Kristen Gill and John Noseworthy, along with Timothy Patrick Flynn, made smaller purchases on May 14 and 15.

So, is the stock really facing excessive punishment? Personally, I would say yes.

UnitedHealth Group has shown consistent growth over the past 30 years. The last decade saw revenue and profit increasing at double-digit rates, averaging over 11% and 17%, respectively.

Currently, the stock is trading at a revenue multiple of 13, whereas the average over the past ten years was closer to 22. The balance sheet isn’t concerning either, with the company’s debt at around 86% of shareholder equity—within what I’d consider acceptable limits.

The firm’s profitability looks solid, showcasing a profit margin of 15% on shareholder equity, which is generally regarded as good, while 20% is considered excellent. Notably, UnitedHealth maintained an impressive 24% margin over the last four quarters, surpassing 20% in seven of the last eight years.

Interestingly, these recent purchases indicate a shift. From June 2022 through late 2024, there were no insider purchases—only sales. This year, however, the trend has clearly reversed.

It seems likely that Hemsley and his fellow executives feel positive about their May acquisitions.

This column marks the 74th in which I’ve discussed insider buying and selling trends. Going back to 1999, there are 64 individuals whose actions represented performance results over time.

A year ago, I recommended Globe Life Inc. and Skyworks Solutions Inc. Globe Life rose by 50.3%, while Skyworks dropped by 19.5%. Meanwhile, the S&P 500 index returned 14.5% during the same period.

Stocks I suggested based on insider buys have averaged a return of 9.2% annually, which is slightly lower than the overall index.

Even when insiders are active buyers, stocks I advised against are lagging 24.3 percentage points behind the index.

On the other hand, stocks focused on insider purchases but not fully addressed in my commentary have outperformed the index by 14.1 percentage points.

In contrast, stocks highlighted by insider sales have performed 2.3 percentage points worse than the index.

The results I present here are hypothetical and shouldn’t be confused with actual outcomes for my clients. Additionally, past performance isn’t a guarantee of future results.

As a disclosure, I personally hold shares in UnitedHealth Group on behalf of several clients as well.