Spokane7
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February 21, 2010 in Business
United Health holds prospects for future gains
Health insurance giant UnitedHealth Group (NYSE: UNH) beat analysts’ quarterly earnings estimates by a whopping 11 percent, only to see its stock slump.
Then again, management couldn’t have expected much more. Wall Street is a “what will you do for me tomorrow?” kind of place, and the company is still dealing with a high unemployment rate, which is a double whammy. It lowers enrollment in its profitable commercial business, and it increases the number of people on COBRA, who tend to be high users of medical services. UnitedHealth is also expecting lower payments from government plans to put pressure on the bottom line.
This earnings season, health insurers are likely to trade more on the whims of politicians than on financial fundamentals, now that the future of health care reform seems less certain. Of course, reforms might actually deliver an expanded base of customers who are required to purchase health insurance.
Generating billions in cash flow each year, UnitedHealth isn’t as cheap as it’s been in the past, but it’s not really expensive, either. Investors who can ride through the tough year can hope to see the insurer improve once the jobs come back.
(UnitedHealth Group is a Motley Fool Inside Value and Motley Fool Stock Advisor selection, and the Fool owns some shares of it, too.)
Ask the Fool
Q: Why can’t I find stock listings in my newspaper on Mondays? – C.C., Bradenton, Fla.
A: It’s usually because the market wasn’t open on the day before, Sunday. In your weekend newspaper, you’ll typically find closing prices for Friday’s trading, and Monday’s results will be published on Tuesday. If you’re in a hurry, you can look up stock prices anytime online.
(Editor’s Note: The Spokesman- Review reports on top local and Northwest stocks Tuesday through Saturday, and distributes a free Saturday Investments section that includes the Friday closing quotes for more than 8,000 mutual funds and stocks. Subscribers may request to receive the Investments section in their Saturday edition by calling 509-459-5000 or 800-338-8801.)
But remember that many of the world’s best investors don’t pay close attention to the latest prices of their holdings. What matters most is how well a company is performing. You could do quite well in your investing life without checking your portfolio’s status every day or every week.
Q: Where can I find out what Wall Street’s expectations are for various companies’ upcoming quarterly reports? – K.W., Mansfield, Ohio
A: Many brokerages these days offer Wall Street research reports. But consider not paying too much attention to expected earnings. Many times, an analyst’s expectations for the firm’s upcoming performance is based on comments and guidance from the firm itself. If a company is telling analysts what it expects to earn and then it earns it, or exceeds the estimate, how impressive is that, really?
Analysts’ reports can be informative when they deliver insights into the challenges facing an industry and its component companies and insights into the health and competitive position of various firms. Just be wary of estimates of future numbers, as the future is hard to predict accurately. And take ratings such as “strong buy” and “outperform” with a grain of salt, too. Analysts don’t give out many negative ratings, as they’d rather not tick off companies that might give their employers business.
My dumbest investment
In the mid-1970s, my broker bought me some shares of a Mexican company, a few at a time, whenever I had some extra dollars left over in my account. It cost about 10 cents per share at the time. I sold them because of my irritation at having to file a one-page tax form each year – and netted $315. A few decades later, I looked the stock up, and it was around $55 a share! Avoiding that extra tax form cost me a bundle. – L.S., via e-mail
The Fool Responds: It’s good to be tax-smart about our investments, especially at this time of year. If you have some big gains, you might sell some stocks with losses, to offset them. But think twice before buying or selling a stock just because of taxes. Sometimes you’re better off taking a tax hit and moving on to a more promising investment. With this Mexican company, you should have assessed its potential and sold if you didn’t believe in it. If it looked like a long-term winner, hanging on would have been best. Get more tax guidance at www.fool.com/taxes.
Northwest wheat 
kaciezsazsa on February 21 at 2:09 a.m.
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