Monday, December 19, 2005

Prozac Nation Should Boost UNH Higher

Our health care play UnitedHealth Group (UNH) was pounced today.

We're still very bullish on the sector.

Health care costs are rising four times as fast as core inflation.

UNH provides health insurance products and administrative services to large employers that prefer to self-insure.

Exploding health care costs and burgeoning enrollment have turned UNH into a veritable cash cow.

They been putting that cash horde to good use, buying back stock hand over fist and making healthy acquisitions, like the targeted PacificCare takeout (which was approved this morning).

Best of all, UNH recently showered analysts with its plan for growing earnings over the next few years -- the long term growth outlook for UNH looks great.

UNH has implemented a cost-savings program predicated on combatting prices by shifting the health-care cost burden to consumers.

You might not like it -- but your portfolio certainly will.

The company, whose laser focus on the lucrative Baby Boomer generation we also like, remains a bellwether for the industry and an established growth play on the health care boom.

Trading at $61, 25 X earnings, and less than 2 X book, UNH may not be a screaming buy.

But stalwarts rarely come cheap.

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