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UnitedHealth Group (UNH) shares have come under significant pressure, collapsing by over 30% in just a few days and now sitting more than 60% below all-time highs. The selloff followed news that the company is under criminal investigation for possible Medicare fraud.
While panic selling often creates opportunity, investors need to tread carefully. One of the most helpful tools in this situation is the “three-day rule,” a simple but powerful guideline that can help avoid catching falling knives and improve your timing when buying stocks under pressure.
Below, I’ll walk through how the rule works, assess whether UnitedHealth shares are cheap, and explore whether now is the time to buy. I’ll also highlight two alternative insurance stocks with stronger price momentum and better Zacks Ranks: The Progressive (PGR) and HCI Group (HCI).
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What Is the 3-Day Rule for Buying Stocks?
The “three-day rule” is a common guideline used by traders and investors alike. It suggests waiting at least three full trading days after a major negative event or sharp drop before considering buying the stock.
Why wait? Because heavy institutional selling, downgrades, and margin call-driven pressure often unfold over several days, not all at once. By the third day, some of that pressure may have been absorbed, and a clearer picture of support and sentiment begins to form.
UnitedHealth’s stock fell sharply on legal risk and headline uncertainty. By waiting for at least a short period of stabilization, long-term investors can get a better entry and avoid stepping into more near-term pain.
Are UnitedHealth Group Shares Cheap?
From a valuation standpoint, UnitedHealth now trades at just 10.5x forward earnings, a steep discount from its 10-year median of 19.1x. Additionally, analysts forecast 12.2% annual EPS growth over the next three to five years, putting its PEG ratio under 1, a level that typically signals undervaluation based on growth.
While uncertainty remains around legal outcomes, the valuation has become undeniably attractive for long-term investors willing to weather near-term noise.
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Should Investors Buy Shares in UNH?
If you’re a long-term investor with a multi-year horizon, the current drop may offer an opportunity. The stock has hit the three-day mark, valuation is compelling, and UnitedHealth still operates one of the largest and most diversified healthcare insurance businesses in the country.
However, the Zacks Rank offers another perspective. UNH currently has a Zacks Rank #5 (Strong Sell), reflecting downward earnings estimate revisions and continued caution among analysts. That suggests caution is still warranted.