Till very lately, UnitedHealth Group (NYSE: UNH) was seen as a safe-haven inventory. As the biggest well being insurer within the US, it was largely proof against tariffs and regarded recession-resistant as a result of fixed want for healthcare. It additionally pays a fast-growing dividend.

However there’s no such factor as a very risk-free inventory. Even seemingly steady juggernauts like UnitedHealth, which had a colossal $535bn market cap till final month, can enter disaster mode.

And that’s what has occurred with the share price crashing practically 48% inside a month! Previous to this, the inventory had doubled in 5 years and greater than quadrupled over a decade.

Right here, I’ll have a look at what has occurred, earlier than assessing whether or not this fallen S&P 500 angel is likely to be a candidate for my ISA.

A number of challenges

UnitedHealth makes cash in two essential methods. First, by its insurance coverage arm, it sells medical insurance plans to people, employers, and the federal government (like Medicare and Medicaid). It collects month-to-month premiums from clients. 

Second, its Optum division supplies companies like managing prescriptions and direct affected person care. This division seems prefer it may very well be negatively impacted by President Trump’s government order to decrease US drug costs. 

He said: “We’re going to cut out the middlemen and facilitate the direct sale of drugs at the most favoured nation price directly to the American citizen.”

OptumRx capabilities as a pharmacy profit supervisor — basically a intermediary within the drug provide chain. So there’s mounting regulatory threat right here. 

That’s not all. The corporate has additionally confronted unexpectedly excessive medical bills in its Medicare Benefit section. This lately led to the suspension of its 2025 monetary outlook, adopted yesterday (13 Might) by the sudden departure of CEO Andrew Witty. 

Low cost valuation

For the complete 12 months, Wall Avenue nonetheless expects income to rise 12.5% to $450bn however earnings per share (EPS) to fall 9.5% to $25. This provides a low ahead price-to-earnings (P/E) ratio of simply 13.

Wanting additional out, double-digit EPS development is forecast for 2026 and 2027, bringing the P/E ratio as little as 10.

There’s additionally a 2.7% dividend yield, which is traditionally excessive for UnitedHealth. The agency has raised payouts for 16 consecutive years, however there’s no assure that may proceed.

On steadiness, the inventory seems to supply a whole lot of worth on the present price. The corporate covers over 50m folks and is deeply embedded within the US medical insurance system. My view right here is that it’s oversold after its 48% crash, and due to this fact most likely ‘on sale’ proper now.

Nonetheless, the fast-changing regulatory panorama and murky outlook for 2025 add an excessive amount of uncertainty for me. I’d relatively make investments my cash elsewhere for the following few years.

Taking inventory

As an investor, I at all times attempt to study classes from such occasions. One key takeaway right here is that the Trump administration is severe about attempting to decrease US healthcare prices.

One other factor Trump doesn’t like is excessive transaction charges, notably these imposed by main cost networks like Visa and Mastercard. Visa is one in all my largest holdings. Might or not it’s the following UnitedHealth?

Nicely, it’s way more world than US-based UnitedHealth, which is a reduction. However vital adjustments in how a lot Visa takes in charges may nonetheless trigger a large sell-off. Meals for thought, a minimum of.