Why Is UnitedHealth Group Stock A Safer Bet In The Current Coronavirus Crisis?

UnitedHealth Group (NYSE: UNH) appears to be a safer bet in the current stock market correction, as it could see a pickup in private health insurance with the coronavirus outbreak. The U.S. has already witnessed growth in the uninsured rate over the past few years. Total uninsured non-elderly population was nearly 30 million in 2018. With the current outbreak people may be willing to spend on health insurance for protection, and the uninsured rate could take a dip in the current quarter. Therefore, companies such as UnitedHealth stand to benefit. Having said that, the company waived the out-of-pocket costs for COVID-19 diagnostic tests for its members, and this move will likely hurt the earnings in the near term. While UNH’s stock has declined due to the current coronavirus and oil price war crisis, going by trends seen during the 2008 slowdown, it’s likely that it could bounce back strongly, and outperform the broader market on the upside, when the crisis winds down. So far, the stock has outperformed the S&P 500, as it fell only 17% compared to a 26% fall for the broader index since February 1, 2020. In this analysis, we take a look at how the company’s stock reacted to the economic crisis of 2008 and compare its performance with the S&P 500. View our complete dashboard analysis on 2007-08 vs. 2020 Crisis Comparison: UnitedHealth Stock Compared with S&P 500.

On Thursday, March 12, the stock markets saw their biggest sell off since 1987’s Black Monday. While the markets saw a sharp recovery on Friday, March 13, it again saw a sharp decline of around 13% on Monday March 16, marking one of the biggest declines ever for the U.S. markets. There were two distinct trends driving the sell-off. Firstly, the increasing number of Coronavirus cases outside China is causing mounting concerns of a global economic slowdown. Secondly, crude oil prices plummeted by more than 30% after Saudi Arabia increased production. UnitedHealth stock fell 20% over the last 6 trading sessions, (between March 9, and March 16), and it is down 17% since early February, considering the impact that the outbreak and a broader economic slowdown could have on the company’s business.

UnitedHealth Stock versus S&P 500 Over 2020 Coronavirus/Oil Price War Crisis

• UnitedHealth’s stock declined by about 20% between March 8, 2020 and March 16, 2020, and the stock is down by about 17% since February 1, after the WHO declared a global health emergency.
• The S&P 500 declined by 20% between March 9, and March 16, and it has fallen by 26% since February 1st.
• In comparison, CVS Health’s stock has declined 23% and Walgreens by around 11% since February 1st.

View our analysis for 2007-08 vs. 2020 Crisis Comparison on CVS Health, and Walgreens Boots Alliance.

We also compare the current coronavirus crash to 4 other market crashes here.

UnitedHealth versus the S&P 500 During 2007-08 Financial Crisis

• UNH stock declined from levels of around $41 in October 2007 (the pre-crisis peak) to levels of around $17 in March 2009 (as the markets bottomed out) and recovered to levels of about $26 in early 2010.
• Through the crisis, UNH stock declined by as much as 59% from its approximate pre-crisis peak. This marked a decline in line with the broader S&P, which fell by as much as 51%.
• UNH stock saw a strong recovery of around 55% between March 2009 and January 2010. The growth was slightly higher than the S&P, which rose by about 48% over the same period.

Conclusion

• While UnitedHealth’s stock has declined due to the coronavirus outbreak and oil price war crisis, going by trends seen during the 2008 slowdown, it’s likely that it could bounce back strongly, and potentially outperform the broader market, when the crisis winds down.

For more detailed charts and a timeline of the 2008 and 2020 crisis for different stocks, view our interactive dashboard analyses on coronavirus.

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