Trading Range Bottoming Stocks

[Garpal Gumnut]

Has anybody noticed any ASX stocks which have been bottoming in a trading range with signs of upward movement and momentum.
Garpal

 

[It's Snake Pliskin]

Have a look at GNS and see what you think.

 

[Riles]

VRE (I hope!)

Depends how long your trading range is.
Others on my gold watch list showing signs of a reversal from support are:
ALD ALK BMO DOM LSG LVR PSV RED
to name but a few...

 

[Garpal Gumnut]

Thanks, all have some potential, particularly impressed with GNS, DOM, and LSG.

Good trading.

Garpal

 

[Garpal Gumnut]

Thanks, all have some potential, particularly impressed with GNS, DOM, and LSG.

Good trading.

Garpal

My apologies to you gg for not replying earlier. I have been a bit busy. Like you I like bottoms very much.

I thought I'd resurrect this thread for the benefit of new members as identifying a stock which has properly bottomed can provide quite a nice profitable trade. And for established members to pick their brains on the topic and perhaps add some other prospects.

So a stock that bottoms classically has three components.

• A gradual decrease in value and volume
• An increase in trading volume as the bottom is close to being reached and holders despair.
• Then a rise in price, sometimes gradual sometimes not, on better volume than on the way down as new traders move in.

A few months ago I noticed a post on CRN Coronado Global Resources Ltd.

CRN - Coronado Global Resources Inc.

Coronado is a low-cost global producer, marketer and exporter of a full range of premium quality met coals. Coronado owns a portfolio of operating mines located in Queensland, Australia, and in the states of Virginia and West Virginia in the US. Coronado has a single 100%-owned producing mining...

www.aussiestockforums.com

It was not on any watch-lists of mine and I was unfamiliar with the stock but the chart was compelling and illustrated the first two of the above three elements of a bottoming stock. It has had other attempts at bottoming and for capital protection and maximisation it is better to have a strict stop loss and secondly not be afraid to add should it appear to be be a proper recovery.

And yes, it could all go to sh*t, so believe me I will not crow until it regains $1.20 and stops have been moved up. A chart illustrating the above.



gg

 

[Dona Ferentes]

Has anybody noticed any ASX stocks which have been bottoming in a trading range with signs of upward movement and momentum.
Garpal

not really. am I too late ?

 

[ducati916]

• UNH's stock collapse is a rare blue-chip event, driven by temporary cost spikes and cyclical headwinds, not a broken business model.
• Insider and smart money buying—including Berskshire Hathaway's $1.6B stake—signals deep value and a contrarian opportunity at current depressed valuations.
• Optum's vertical integration and earnings power create a moat; at current prices, I believe the insurance business is essentially free.
• 2026 industry repricing is a major catalyst; even my bear-case scenarios show limited downside, while upside could reach 80%+ over 18-24 months.

J Studios/DigitalVision via Getty Images


I have been investing for over a decade, and I can count on one hand the number of times I've seen a blue chip giant get decimated like UnitedHealth Group (NYSE:UNH) has over the past few months. There was a full-blown capitulation in one of America's most dominant healthcare stocks. The stock has been absolutely obliterated 50% from its April peak north of $600 to current levels of around $300.

Data by YCharts

Everyone was panicking after the Q2 result. The stock took another dive and went below $240. The Q2 earnings report confirmed the operational problems but reset expectations, and then insiders began buying with their own money, not exercising options. Stephen Hemsley, UNH's CEO, dropped $25 million of his own cash into the stock in May 2025, right in the teeth of the selloff.
But the insider buying was just the start of it. In August, a cascade of smart money started flowing into UNH that completely changed the narrative. Renaissance Technologies bought 1.35 million shares. Michael Burry'sScion Asset Management also initiated a position. To top it all off, Warren Buffett's Berkshire Hathaway disclosed they bought over 5 million shares worth $1.6 billion in Q2, making UNH their 18th largest position.
Buffett’s Berkshire doesn't buy distressed assets hoping for a bounce; they buy quality assets at discounts to intrinsic value with long-term moats. They bought after the Q1 earnings disaster but before the Q2 guidance cut.
Before Buffett's disclosure, UNH was becoming a "broken story" stock that institutional investors were afraid to touch. But now the narrative has changed. Suddenly it's not a broken story, it's a contrarian value play endorsed by the Oracle of Omaha. Now you might think that after Berkshire's position disclosure, it's too late to buy UNH.
The market is still pricing UNH as if its entire business model is broken, when in reality I think it is just cyclical headwind that will resolve through the industry's upcoming repricing cycle in 2026.

Story Behind The Carnage​

Let me walk you through exactly what happened in Q2 2025 because I believe the financial media has done a terrible job explaining the nuances. In fact, some SA analysts have done a much better job than them. Around August 5th, UNH was trading below $250 and everyone was panicking. If you had read these four articles below in the picture, you likely would have bought more like me instead of panicking and would be sitting on some solid gains.


Seeking Alpha

UNH's Q2 results were ugly; there's no sugarcoating it. Their medical care ratio jumped to 89.4% (up 430 basis points y/y) driven by what management calls "intensifying" medical encounters.
In plain English, every time someone visits the ER or sees a physician, more services are being bundled, procedures are getting more complex, and costs escalate faster than anyone anticipated.
They reported revenue of $111.6 billion for the quarter, up 13% y/y that actually beat expectations. But here's where things went south; their adjusted EPS came in at $4.08, missing estimates by $0.37. That's not a small miss.


Compiled By Author Based on UNH 10-Q

The consolidated MCR exploded to 89.4% from 85.1% the prior year is what really caught everyone off guard. Because every 100 basis points on the MCR for a company their size translates to roughly $3.5 billion in annual medical costs. We're talking about a 430 basis point deterioration, which means about $15 billion in unexpected medical expenses on an annualized basis. No wonder the stock got obliterated.


Compiled By Author Based on UNH 10-Q

Medical costs are tracking $6.5 billion above initial 2025 forecasts, with Medicare Advantage bearing the brunt of the pain. They were off by $6.5 billion in just their medical cost assumptions. Over half of this miss is concentrated in the Medicare Advantage portfolio, with the remainder split between commercial and Medicaid.
UnitedHealthcare's operating margins collapsed from 5.4% to just 2.4%, and they were forced to slash full-year guidance to "at least $16" in adjusted EPS, down from initial expectations near $29. That's a massive reset, and the market reacted accordingly.
The market reaction was fair, but if you look at these problems, they are not permanent or structural; I believe these are temporary problems. This happened because of timing mismatches between cost inflation and pricing adjustments. The healthcare insurance industry operates on annual pricing cycles, and UNH got caught off guard by the acceleration in medical utilization post-COVID. And the market repriced the stock accordingly, which creates an opportunity, as Benjamin Graham said:

“in the short term, the market is a voting machine. In the long-term, it is a weighing machine”,

I already saw this reaction kind of coming from their Q1 results; that’s why I didn’t buy after the Q1 selloff. I was waiting for further clarity and after the Q2 results, when the stock hit, I decided that’s enough and bought some.
Now here is how I think recovery for United Health would look like.

The Optum Advantage​

This is where my thesis gets really interesting and where I think most people are completely missing the bigger picture. UnitedHealth isn't just an insurance company, it's a vertically integrated healthcare ecosystem.
Look at the Q2 segment breakdown while UnitedHealthcare struggled with margin compression, Optum still generated $67.2 billion in revenue (up 7% y/y). Within that, OptumRx absolutely crushed it with $38.5 billion in revenue, up 19% or $6 billion from last year. This growth was driven by new customer additions and continued contribution from specialty products.


Compiled By Author Based on UNH 10-Q

OptumHealth's performance was admittedly disappointing with revenues of $25.2 billion, down $1.8 billion from last year. But here's where you need to understand the context.


Compiled By Author Based on UNH 10-Q

They're dealing with a $6.6 billion shortfall in OptumHealth earnings versus expectations, with $3.6 billion concentrated in value-based care. The V28 payment model changes alone created an $11 billion headwind over three years, with $7 billion realized through 2025. But these are temporary headwinds, not permanent impairments. I expect OptumHealth to be back on track by Q2 of FY26 which I talk about a bit later here.
The strategic value of this vertical integration cannot be overstated. Through Optum, UNH operates across the entire healthcare value chain: pharmacy benefits (OptumRx), care delivery (OptumHealth) and healthcare technology/data analytics (OptumInsight). This gives them multiple revenue streams beyond insurance premiums.
Here's my opinion on Optum: this business generated over $23 billion in operating earnings on a TTM basis despite all these headwinds. The strategic value of having pharmacy benefits, care delivery, and health technology under one roof creates a moat that is nearly impossible to replicate. You can't just go out and build another OptumRx with its scale. You can't replicate OptumHealth's 70,000 physicians overnight. And you certainly can't recreate OptumInsight's data assets, covering hundreds of millions of lives.
The market right now is valuing UNH like a traditional insurer facing margin pressure, but Optum generated $23.2 billion in operating earnings TTM. At a conservative 13x multiple, that's $300 billion in value from Optum alone, nearly matching UNH's entire current market cap of around $280 billion. You're essentially getting the insurance business for free, in my view.

There’s an Upcoming Catalyst For 2026​

The healthcare insurance industry is about to enter a major repricing cycle. I have tried to study some major Medicare Advantage repricing cycles, and they follow a predictable pattern. When medical costs spike industry-wide, insurers initially absorb the hit to maintain market share and regulatory goodwill. But once the pressure becomes unsustainable, which is exactly where I think we are now, the entire industry moves in concert to reprice products. We saw this in 2011, 2016, and we're about to see it again in 2026.
Timothy John Noel said on the earnings call that:

“Our Medicare Advantage pricing strategy for 2026 assumes a trend approaching 10% compared to our current 7.5% trend expectation. This accounts for trend acceleration and incorporates factors such as changes in fee schedules and the continuation of higher yields from provider coding and billing practices.”

Think about what that means, they're going to price 2026 products assuming medical costs will grow at 10% annually. That's a massive reset from the 5% trend they assumed for 2025, and it's likely going to flow straight through to the bottom line once implemented.
Right now they are prioritizing membership retention over short-term profitability, setting up for a more favorable negotiating position when repricing begins. With over 51 million members in their insurance products and another 99 million served through Optum Health, they have the scale to drive industry pricing.
Here's what I think most people don't understand about these repricing cycles; they are not just about raising prices in isolation. When the largest player in the market with 15% market share starts repricing aggressively, it creates air cover for the entire industry to follow. Elevance, Humana, and Centene are all dealing with the same medical cost pressures.


Compiled By Author Based on UNH 10-Q

If the medical cost trend moderates from 7.5% to even 6% (still above historical averages) and they successfully implement 10% pricing in Medicare Advantage while maintaining, I believe we're looking at a 400 to 500 basis point margin improvement opportunity. On a $470 billion revenue base in 2026, that could mean $19-23 billion in operating earnings.

The Opportunity Is Staring Us In The Face​

At current levels around $300, UNH currently trades at 13x P/E ratio.

Data by YCharts

That alone should make you take notice. Because they averaged a 25x P/E over the past five years, delivered 14.6% annual EPS growth over the past decade and now trades at a 40% discount to its historical multiple. The Street is projecting $16 for 2025 then a gradual recovery to maybe $20 by 2026 and $27 by 2027. That's linear thinking in a non-linear situation. Based on my analysis of previous repricing cycles in managed care you are not looking at a gradual recovery you are looking at a leap once the 2026 pricing takes effect.
Let me paint you a picture of what I think actually will happen. UNH is currently operating at a 2.4% margin in their insurance business, down from historical levels of 5-6%. They are repricing Medicare Advantage assuming a 10% medical cost trend. When you combine these factors we would return to 5% margins by late 2026, which could drive EPS to $28, not the $20 that Street expects.
At $28 EPS in 2026 and even a modest 16x multiple which is still well below historical averages we're looking at a $448 stock. At $30 EPS and an 18x multiple, which is where quality healthcare companies typically trade, that's $540. It is about 80% upside over the next 18-24 months.
The stock trades at just 0.66x trailing sales. Which means that the market is valuing every dollar of their revenue at around 66 cents, despite the fact that revenue continues to grow at double-digit rates.

Data by YCharts

Now, what if UNH just returned to its historical average P/S multiple of 1.3x? At $448 billion in 2025 revenue that implies a market cap of $614 billion. With 914 million shares outstanding, that's $672 per share. Now I'm not saying the stock will go to $672 that would require everything to go perfectly. But it shows just how compressed the valuation has become.
Now, what if I'm wrong about the recovery? What if margins stay depressed longer than expected? Even in my bear case, the valuation provides a margin of safety. Let's say UNH only manages to earn $16 in 2025, $18 in 2026 and $22 in 2027. At a discounted 14x multiple on that $22 you are still looking at a $308 stock basically flat from here. I believe the downside is limited because they are already priced for a worst-case scenario.

Problems Ahead​

The first problem they are facing is the DOJ investigation into Medicare Advantage billing practices. The market freaked out when this news broke but I think it's less scary than it seems. These investigations are routine in this industry. I am budgeting for a $1-2 billion settlement which would be painful but okay given their solid balance sheet.
The biggest problem is that the medical cost trend could accelerate further before it stabilizes. If the medical care ratio pushes above 90% and stays there through 2025 the earnings recovery timeline gets pushed out. But even in this scenario it is a delay not a permanent impairment. The demographic tailwinds driving healthcare demand aren't going away.

Final Thoughts​

Their problems and cost issues are temporary and will be fixed through 2026 repricing in my opinion. Berkshire bought $1.6B, and the CEO invested $25M personal cash. Medical costs are cyclical, not permanent. Optum is worth $300B alone, more than the entire market cap. And right now, valuation is so compressed that it gives us a margin of safety with very limited downside.

This article was written by

Sophos Research
560 Followers

I’m Laura Bennett, the writer behind Sophos Research. I started my career as a software engineer at Amazon, where I spent over five years working on large-scale distributed systems and backend architecture. My background is deeply technical, and over the years, my writing on software infrastructure, AI systems, and cloud technologies has been featured in outlets like TechCrunch and other leading tech publications. In 2021, I developed a strong interest in the financial markets particularly the intersection of software, infrastructure, and capital allocation. I began studying financial reports the same way I would debug a complex system looking for patterns, understanding structure, and identifying the weak points others might overlook. Today, I work at a small tech firm that builds algorithmic trading platforms and low-latency infrastructure for institutional clients and hedge funds. That experience gives me a view into how markets function beneath the surface from data pipelines and execution engines to portfolio risk models. On Seeking Alpha, I focus on analyzing tech companies through a technical and fundamental lens. I write about enterprise software, cloud infrastructure, AI platforms, and the trading technology that powers modern finance.





So I have looked at UNH for a while.

Obviously Buffett and Burry buying in are positives.





jog on
duc

 

[qldfrog]

My apologies to you gg for not replying earlier. I have been a bit busy. Like you I like bottoms very much.

I thought I'd resurrect this thread for the benefit of new members as identifying a stock which has properly bottomed can provide quite a nice profitable trade. And for established members to pick their brains on the topic and perhaps add some other prospects.

So a stock that bottoms classically has three components.

• A gradual decrease in value and volume
• An increase in trading volume as the bottom is close to being reached and holders despair.
• Then a rise in price, sometimes gradual sometimes not, on better volume than on the way down as new traders move in.

A few months ago I noticed a post on CRN Coronado Global Resources Ltd.

CRN - Coronado Global Resources Inc.

Coronado is a low-cost global producer, marketer and exporter of a full range of premium quality met coals. Coronado owns a portfolio of operating mines located in Queensland, Australia, and in the states of Virginia and West Virginia in the US. Coronado has a single 100%-owned producing mining...

www.aussiestockforums.com

It was not on any watch-lists of mine and I was unfamiliar with the stock but the chart was compelling and illustrated the first two of the above three elements of a bottoming stock. It has had other attempts at bottoming and for capital protection and maximisation it is better to have a strict stop loss and secondly not be afraid to add should it appear to be be a proper recovery.

And yes, it could all go to sh*t, so believe me I will not crow until it regains $1.20 and stops have been moved up. A chart illustrating the above.

View attachment 206932

gg

One of my star stock yesterday , hope you are right on this one

 

[Garpal Gumnut]

not really. am I too late ?

With the healthy green volume to the right and the sell off massive red on the right many would wait for this confirmation if investing rather than trading in this stock. Coal is sexy atm. after years in the doldrums. CRN as well as the Bowen Basin has assets in the Appalachians.

Home - Coronado Global Resources Inc.

Coronado Global Resources Inc. is a leading producer of high-quality metallurgical coal and a trusted supplier to the steel industry.

coronadoglobal.com

gg

 

[Garpal Gumnut]

• UNH's stock collapse is a rare blue-chip event, driven by temporary cost spikes and cyclical headwinds, not a broken business model.
• Insider and smart money buying—including Berskshire Hathaway's $1.6B stake—signals deep value and a contrarian opportunity at current depressed valuations.
• Optum's vertical integration and earnings power create a moat; at current prices, I believe the insurance business is essentially free.
• 2026 industry repricing is a major catalyst; even my bear-case scenarios show limited downside, while upside could reach 80%+ over 18-24 months.

View attachment 206943

J Studios/DigitalVision via Getty Images


I have been investing for over a decade, and I can count on one hand the number of times I've seen a blue chip giant get decimated like UnitedHealth Group (NYSE:UNH) has over the past few months. There was a full-blown capitulation in one of America's most dominant healthcare stocks. The stock has been absolutely obliterated 50% from its April peak north of $600 to current levels of around $300.

View attachment 206944Data by YCharts

Everyone was panicking after the Q2 result. The stock took another dive and went below $240. The Q2 earnings report confirmed the operational problems but reset expectations, and then insiders began buying with their own money, not exercising options. Stephen Hemsley, UNH's CEO, dropped $25 million of his own cash into the stock in May 2025, right in the teeth of the selloff.
But the insider buying was just the start of it. In August, a cascade of smart money started flowing into UNH that completely changed the narrative. Renaissance Technologies bought 1.35 million shares. Michael Burry'sScion Asset Management also initiated a position. To top it all off, Warren Buffett's Berkshire Hathaway disclosed they bought over 5 million shares worth $1.6 billion in Q2, making UNH their 18th largest position.
Buffett’s Berkshire doesn't buy distressed assets hoping for a bounce; they buy quality assets at discounts to intrinsic value with long-term moats. They bought after the Q1 earnings disaster but before the Q2 guidance cut.
Before Buffett's disclosure, UNH was becoming a "broken story" stock that institutional investors were afraid to touch. But now the narrative has changed. Suddenly it's not a broken story, it's a contrarian value play endorsed by the Oracle of Omaha. Now you might think that after Berkshire's position disclosure, it's too late to buy UNH.
The market is still pricing UNH as if its entire business model is broken, when in reality I think it is just cyclical headwind that will resolve through the industry's upcoming repricing cycle in 2026.

Story Behind The Carnage​

Let me walk you through exactly what happened in Q2 2025 because I believe the financial media has done a terrible job explaining the nuances. In fact, some SA analysts have done a much better job than them. Around August 5th, UNH was trading below $250 and everyone was panicking. If you had read these four articles below in the picture, you likely would have bought more like me instead of panicking and would be sitting on some solid gains.

View attachment 206945
Seeking Alpha

UNH's Q2 results were ugly; there's no sugarcoating it. Their medical care ratio jumped to 89.4% (up 430 basis points y/y) driven by what management calls "intensifying" medical encounters.
In plain English, every time someone visits the ER or sees a physician, more services are being bundled, procedures are getting more complex, and costs escalate faster than anyone anticipated.
They reported revenue of $111.6 billion for the quarter, up 13% y/y that actually beat expectations. But here's where things went south; their adjusted EPS came in at $4.08, missing estimates by $0.37. That's not a small miss.

View attachment 206946
Compiled By Author Based on UNH 10-Q

The consolidated MCR exploded to 89.4% from 85.1% the prior year is what really caught everyone off guard. Because every 100 basis points on the MCR for a company their size translates to roughly $3.5 billion in annual medical costs. We're talking about a 430 basis point deterioration, which means about $15 billion in unexpected medical expenses on an annualized basis. No wonder the stock got obliterated.

View attachment 206947
Compiled By Author Based on UNH 10-Q

Medical costs are tracking $6.5 billion above initial 2025 forecasts, with Medicare Advantage bearing the brunt of the pain. They were off by $6.5 billion in just their medical cost assumptions. Over half of this miss is concentrated in the Medicare Advantage portfolio, with the remainder split between commercial and Medicaid.
UnitedHealthcare's operating margins collapsed from 5.4% to just 2.4%, and they were forced to slash full-year guidance to "at least $16" in adjusted EPS, down from initial expectations near $29. That's a massive reset, and the market reacted accordingly.
The market reaction was fair, but if you look at these problems, they are not permanent or structural; I believe these are temporary problems. This happened because of timing mismatches between cost inflation and pricing adjustments. The healthcare insurance industry operates on annual pricing cycles, and UNH got caught off guard by the acceleration in medical utilization post-COVID. And the market repriced the stock accordingly, which creates an opportunity, as Benjamin Graham said:

I already saw this reaction kind of coming from their Q1 results; that’s why I didn’t buy after the Q1 selloff. I was waiting for further clarity and after the Q2 results, when the stock hit, I decided that’s enough and bought some.
Now here is how I think recovery for United Health would look like.

The Optum Advantage​

This is where my thesis gets really interesting and where I think most people are completely missing the bigger picture. UnitedHealth isn't just an insurance company, it's a vertically integrated healthcare ecosystem.
Look at the Q2 segment breakdown while UnitedHealthcare struggled with margin compression, Optum still generated $67.2 billion in revenue (up 7% y/y). Within that, OptumRx absolutely crushed it with $38.5 billion in revenue, up 19% or $6 billion from last year. This growth was driven by new customer additions and continued contribution from specialty products.

View attachment 206948
Compiled By Author Based on UNH 10-Q

OptumHealth's performance was admittedly disappointing with revenues of $25.2 billion, down $1.8 billion from last year. But here's where you need to understand the context.

View attachment 206949
Compiled By Author Based on UNH 10-Q

They're dealing with a $6.6 billion shortfall in OptumHealth earnings versus expectations, with $3.6 billion concentrated in value-based care. The V28 payment model changes alone created an $11 billion headwind over three years, with $7 billion realized through 2025. But these are temporary headwinds, not permanent impairments. I expect OptumHealth to be back on track by Q2 of FY26 which I talk about a bit later here.
The strategic value of this vertical integration cannot be overstated. Through Optum, UNH operates across the entire healthcare value chain: pharmacy benefits (OptumRx), care delivery (OptumHealth) and healthcare technology/data analytics (OptumInsight). This gives them multiple revenue streams beyond insurance premiums.
Here's my opinion on Optum: this business generated over $23 billion in operating earnings on a TTM basis despite all these headwinds. The strategic value of having pharmacy benefits, care delivery, and health technology under one roof creates a moat that is nearly impossible to replicate. You can't just go out and build another OptumRx with its scale. You can't replicate OptumHealth's 70,000 physicians overnight. And you certainly can't recreate OptumInsight's data assets, covering hundreds of millions of lives.
The market right now is valuing UNH like a traditional insurer facing margin pressure, but Optum generated $23.2 billion in operating earnings TTM. At a conservative 13x multiple, that's $300 billion in value from Optum alone, nearly matching UNH's entire current market cap of around $280 billion. You're essentially getting the insurance business for free, in my view.

There’s an Upcoming Catalyst For 2026​

The healthcare insurance industry is about to enter a major repricing cycle. I have tried to study some major Medicare Advantage repricing cycles, and they follow a predictable pattern. When medical costs spike industry-wide, insurers initially absorb the hit to maintain market share and regulatory goodwill. But once the pressure becomes unsustainable, which is exactly where I think we are now, the entire industry moves in concert to reprice products. We saw this in 2011, 2016, and we're about to see it again in 2026.
Timothy John Noel said on the earnings call that:

Think about what that means, they're going to price 2026 products assuming medical costs will grow at 10% annually. That's a massive reset from the 5% trend they assumed for 2025, and it's likely going to flow straight through to the bottom line once implemented.
Right now they are prioritizing membership retention over short-term profitability, setting up for a more favorable negotiating position when repricing begins. With over 51 million members in their insurance products and another 99 million served through Optum Health, they have the scale to drive industry pricing.
Here's what I think most people don't understand about these repricing cycles; they are not just about raising prices in isolation. When the largest player in the market with 15% market share starts repricing aggressively, it creates air cover for the entire industry to follow. Elevance, Humana, and Centene are all dealing with the same medical cost pressures.

View attachment 206950
Compiled By Author Based on UNH 10-Q

If the medical cost trend moderates from 7.5% to even 6% (still above historical averages) and they successfully implement 10% pricing in Medicare Advantage while maintaining, I believe we're looking at a 400 to 500 basis point margin improvement opportunity. On a $470 billion revenue base in 2026, that could mean $19-23 billion in operating earnings.

The Opportunity Is Staring Us In The Face​

At current levels around $300, UNH currently trades at 13x P/E ratio.

View attachment 206951Data by YCharts

That alone should make you take notice. Because they averaged a 25x P/E over the past five years, delivered 14.6% annual EPS growth over the past decade and now trades at a 40% discount to its historical multiple. The Street is projecting $16 for 2025 then a gradual recovery to maybe $20 by 2026 and $27 by 2027. That's linear thinking in a non-linear situation. Based on my analysis of previous repricing cycles in managed care you are not looking at a gradual recovery you are looking at a leap once the 2026 pricing takes effect.
Let me paint you a picture of what I think actually will happen. UNH is currently operating at a 2.4% margin in their insurance business, down from historical levels of 5-6%. They are repricing Medicare Advantage assuming a 10% medical cost trend. When you combine these factors we would return to 5% margins by late 2026, which could drive EPS to $28, not the $20 that Street expects.
At $28 EPS in 2026 and even a modest 16x multiple which is still well below historical averages we're looking at a $448 stock. At $30 EPS and an 18x multiple, which is where quality healthcare companies typically trade, that's $540. It is about 80% upside over the next 18-24 months.
The stock trades at just 0.66x trailing sales. Which means that the market is valuing every dollar of their revenue at around 66 cents, despite the fact that revenue continues to grow at double-digit rates.

View attachment 206952Data by YCharts

Now, what if UNH just returned to its historical average P/S multiple of 1.3x? At $448 billion in 2025 revenue that implies a market cap of $614 billion. With 914 million shares outstanding, that's $672 per share. Now I'm not saying the stock will go to $672 that would require everything to go perfectly. But it shows just how compressed the valuation has become.
Now, what if I'm wrong about the recovery? What if margins stay depressed longer than expected? Even in my bear case, the valuation provides a margin of safety. Let's say UNH only manages to earn $16 in 2025, $18 in 2026 and $22 in 2027. At a discounted 14x multiple on that $22 you are still looking at a $308 stock basically flat from here. I believe the downside is limited because they are already priced for a worst-case scenario.

Problems Ahead​

The first problem they are facing is the DOJ investigation into Medicare Advantage billing practices. The market freaked out when this news broke but I think it's less scary than it seems. These investigations are routine in this industry. I am budgeting for a $1-2 billion settlement which would be painful but okay given their solid balance sheet.
The biggest problem is that the medical cost trend could accelerate further before it stabilizes. If the medical care ratio pushes above 90% and stays there through 2025 the earnings recovery timeline gets pushed out. But even in this scenario it is a delay not a permanent impairment. The demographic tailwinds driving healthcare demand aren't going away.

Final Thoughts​

Their problems and cost issues are temporary and will be fixed through 2026 repricing in my opinion. Berkshire bought $1.6B, and the CEO invested $25M personal cash. Medical costs are cyclical, not permanent. Optum is worth $300B alone, more than the entire market cap. And right now, valuation is so compressed that it gives us a margin of safety with very limited downside.

This article was written by

Sophos Research
560 Followers

I’m Laura Bennett, the writer behind Sophos Research. I started my career as a software engineer at Amazon, where I spent over five years working on large-scale distributed systems and backend architecture. My background is deeply technical, and over the years, my writing on software infrastructure, AI systems, and cloud technologies has been featured in outlets like TechCrunch and other leading tech publications. In 2021, I developed a strong interest in the financial markets particularly the intersection of software, infrastructure, and capital allocation. I began studying financial reports the same way I would debug a complex system looking for patterns, understanding structure, and identifying the weak points others might overlook. Today, I work at a small tech firm that builds algorithmic trading platforms and low-latency infrastructure for institutional clients and hedge funds. That experience gives me a view into how markets function beneath the surface from data pipelines and execution engines to portfolio risk models. On Seeking Alpha, I focus on analyzing tech companies through a technical and fundamental lens. I write about enterprise software, cloud infrastructure, AI platforms, and the trading technology that powers modern finance.





So I have looked at UNH for a while.

Obviously Buffett and Burry buying in are positives.


View attachment 206942


jog on
duc

I did have a piece of UNH not so long ago in July but I got the heebies when it went south again and sold at a loss. It is worth keeping an eye on now that Buffett has declared his hand and the copycats have been given a bit of shorting medicine.

gg

 

[Garpal Gumnut]

With the healthy green volume to the right and the sell off massive red on the right many would wait for this confirmation if investing rather than trading in this stock. Coal is sexy atm. after years in the doldrums. CRN as well as the Bowen Basin has assets in the Appalachians.

Home - Coronado Global Resources Inc.

Coronado Global Resources Inc. is a leading producer of high-quality metallurgical coal and a trusted supplier to the steel industry.

coronadoglobal.com

gg

YDOY DYOD DDOR DYRO DYOO RRDY RODY Whatever.

@Dona Ferentes

gg

 

[Dona Ferentes]

YDOY DYOD DDOR DYRO DYOO RRDY RODY Whatever.

@Dona Ferentes

gg

DIY ?

NIMP ?

 

[divs4ever]

Has anybody noticed any ASX stocks which have been bottoming in a trading range with signs of upward movement and momentum.
Garpal

yes , AGL ( on my AVOID list ) , AMC , BEAR ( i hold ) ,

and maybe REH is worthy of being placed on such a watch-list , there might be a bottom soon

 

[TimeISmoney]

not really. am I too late ?

Only by 20 years.

 

[Garpal Gumnut]

I just happened to notice CHN on it's thread and it has a rather charming bottom. It had a good 150% run from April to July and looks out of favour again dropping 4.64% today. I'll keep an eye on it should it attempt to do a repeat if it tanks over the next few months.



gg