We recently published a list of 15 Best Large-Cap Value Stocks to Buy as the Recession Hits. In this article, we are going to take a look at where UnitedHealth Group Incorporated (NYSE:UNH) stands against other best large-cap value stocks to buy as the recession hits.
Goldman Sachs highlighted that equities around the world traded in and out of a bear market — which is often defined as a 20% decline from the recent peak. According to Peter Oppenheimer, chief global equity strategist at Goldman Sachs Research, the history of bear markets can provide some clues regarding the duration and severity of such downturns. U.S. stocks ended significantly higher after Trump announced his decision to put a 90-day pause on the additional country-specific portion of the reciprocal tariffs. That being said, Oppenheimer believes that a sustained rebound isn’t yet in place. As per the strategist, the valuations are required to adjust further before equities can shift into the “hope” phase of the next cycle.
What to Expect from Current Earnings Season?
With the Q1 2025 earnings season underway, Morningstar informs that investors can expect more focus than usual on what companies want to say regarding their outlooks, while the uncertainty surrounding tariffs means offering weaker, less confident, or even no guidance. Tariffs can impact the corporate bottom lines in several ways, both directly and indirectly. Notably, the increased import costs put more pressure on the margins. While some firms can decide to alleviate the pressure by increasing the prices for customers, others can choose to absorb them, says the firm. Morningstar, while quoting FactSet’s consensus estimates, mentioned that analysts expect 6.8% earnings growth in Q1 for companies in the S&P 500 benchmark index. For the full year, analysts anticipate an 11.2% growth.
Forward guidance is what generally moves the financial markets. If the firm warns that there can be a possibility to see smaller profits, the stock tends to fall. This might happen across the market, but there is a silver lining. As per Morningstar chief research and investment officer Dan Kemp, it is important to note that most of the value lies in the future. Therefore, the impact on the company’s real value is expected to be muted. According to him, widening of the gap between stock prices and future real values can be a very fertile soil for the market investors.
Christian Mueller-Glissmann, head of asset allocation research within portfolio strategy for Goldman Sachs Research, says that investors need to think about diversifying regionally and across styles. To be specific, this consists of low-volatility stocks, i.e., equities from more defensive sectors, that fluctuate less than the broader market.
Our Methodology
To list the 15 Best Large-Cap Value Stocks to Buy as the Recession Hits, we considered companies from the industries which are expected to be resilient in a recessionary environment, such as utilities, healthcare, and consumer. Next, we chose the stocks that trade at a forward P/E of less than ~20.0x. Finally, the stocks are arranged in ascending order of the hedge fund sentiments, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is UnitedHealth Group Incorporated (UNH) the Best Large-Cap Value Stock to Buy as the Recession Hits?
A senior healthcare professional giving advice to a patient in a clinic.
UnitedHealth Group Incorporated (NYSE:UNH) operates as a healthcare company. Truist upped the price objective on the company’s stock to $660 from $610, keeping a “Buy” rating as part of the broader research note previewing Q1 results in Healthcare Services. As per the firm, the sector seems to be relatively well-placed in a fluid environment considering the scaled, largely domestic, attractive FCF generating and defensive nature of the group. UnitedHealth Group Incorporated (NYSE:UNH)’s diversified portfolio, which spans health insurance, pharmacy benefits management, and healthcare services, places it well for continued growth. Furthermore, the synergies between the segments enable cross-selling opportunities and integrated care delivery models.
Elsewhere, AM Best, a leading ratings agency, highlighted that UnitedHealth Group Incorporated (NYSE:UNH)’s operating earnings benefit from a large scale, offering cost advantages for medical expenditures and administrative expenses. As per the firm, the company’s strategic focus is on value-based care and reimbursement models to align provider and payor, which supports managing medical cost trends and improving outcomes for members. UnitedHealth Group Incorporated (NYSE:UNH)’s large membership base results in significant economies of scale. Also, the integration of UnitedHealth Group Incorporated (NYSE:UNH) with its affiliate, Optum, provides the former with a competitive advantage by providing access to advanced capabilities for cost management, pharmacy and innovative technology, care delivery, and strong data analytics.
Baron Funds, an investment management company, released its Q4 2024 investor letter. Hereis what the fund said:
“Shares of UnitedHealth Group Incorporated (NYSE:UNH), the largest health care company by revenue, were volatile in the quarter. Quarterly medical cost trends ran higher than expected, the high end of quarterly guidance was cut, and the preliminary 2025 outlook missed consensus. The Republican November election sweep drove shares up, as Republicans have historically been more supportive of managed care, which bodes especially well for Medicare Advantage, the industry’s main growth engine. In December, UnitedHealth’s CEO was shot and killed, and the subsequent outpouring of public anger over the managed care industry’s history of claims denials sparked concern about the industry’s ability to control health care spend. The specter of pharmacy benefit manager (PBM) legislation was an additional pressure along with multiple press pieces questioning managed care practices and profit drivers. Longer term, we believe managed care will remain embedded in the U.S. health care system and UnitedHealth, as the largest, best managed, and most disciplined and forward-thinking company in the industry, will continue to grow.”
Overall, UNH ranks 1st on our list of best large-cap value stocks to buy as the recession hits. While we acknowledge the potential of UNH as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than UNH but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
