UNH

Update on UNH:

Since purchasing UNH a couple months back the stock has not done to much for our portfolio, however, now may be a good time to add to it rather than divesting our ownership. It has been well over ayear since the revelation of the stock options scandal forced UNH to restate 13 years worth of earnings, and make many management changes at crucial high level positions.

The stock is up over 25% since May of 2006, but still well below its record high of 65 in late 2005. It is currently trading at 16 times next years expected earnings, which is well below the majority of their competitors. Compounding the low forward P/E ratio is the fact that its long term earns growth rate is estimated at 16% a year, much higher than many if their competitors.
UNH has been successful by focusing on three distinct business segments: Selling health insurance, offering private Medicare plans, and providing technology to companies to help control costs.

This technology aspect will continue to grow in importance over time. Just recently UNH played a huge role in highlighting the risks of the arthritis drug vioxx. UNH was able to track client data and show a correlation between the increased health risks of taking the drug.

While there still may be some side effects from the options back dating scandals which occurred, with pending litigation still awaiting trial. Some analysts, such as Thomas Caroll, say that the fallout will not make a significant impact on future earnings.

While the stock has not done much for us, this is a solid stock, in a solid industry, with good long term growth prospects.

Dave Seaton