Although solid third-quarter earnings, declining jobless claims, and rising consumer spending drove the markets to fresh highs last month, the emergence of a highly infectious new COVID-19 variant, high inflation, geopolitical tensions, supply chain constraints, and…
the Federal Reserve’s decision to taper its bond purchasing have been fostering worrisome market volatility of late. Because these factors are not likely to dissipate soon, betting on mega-cap stocks with exceptional growth potential and strong fundamentals could be an ideal strategy to hedge one’s investment portfolio against the expected market fluctuations.
Mega-cap stocks, which possess a market capitalization of $200 billion or more, have the potential to dodge short-term fluctuations and deliver stable returns. Also, favorable policies to encourage domestic production and ongoing efforts to address supply chain issues further enhance mega-cap stocks’ growth prospects.
Prominent mega-cap players UnitedHealth Group Incorporated (UNH – Get Rating), Walmart Inc. (WMT – Get Rating), Oracle Corporation (ORCL – Get Rating), Cisco Systems, Inc. (CSCO – Get Rating), and Broadcom Inc. (AVGO – Get Rating) have the potential to capitalize on their respective industry tailwinds and deliver stable returns. Given their solid combination of value and quality, we think these stocks can be reasonably characterized as “no-brainers.”
UnitedHealth Group Incorporated (UNH – Get Rating)
With a market cap of $420.08 billion, UNH in Minnetonka, Minn., is a diversified health care and insurance company that offers a broad spectrum of products and services through UnitedHealthcare and Optum platforms. The company provides employers with products and resources to plan and administer employee benefit programs. It has a 0.77 beta.
On December 1, 2021, UNH introduced a new health plan that offers personalized and seamless customer support and the opportunity to save up to 15% on premiums to consumers in Southwest Arizona. By providing access to quality, affordable, patient-focused health care for people with employer-sponsored health coverage, UNH expects to witness high enrolment in this plan in the coming months.
For its fiscal third quarter, ended September 30, 2021, UNH’s total revenues increased 11.9% year-over-year to $72.34 billion. The company’s earnings from operations came in at $5.71 billion for the quarter, representing a 22.8% year-over-year improvement. UNH’s adjusted net earnings were $4.32 billion, up 27.8% from their year-ago period. Its adjusted EPS increased 28.8% year-over-year to $4.52. The company had $21.09 billion in cash and cash equivalents as of September 30, 2021.
Analysts expect the stock’s EPS to increase 11.6% year-over-year to $18.84 in the current year. A $286.24 billion consensus revenue estimate for the current year represents an 11.3% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. UNH’s EPS is expected to grow at a 13.9% rate per annum over the next five years.
Over the past nine months, the stock has gained 32.8% in price and closed yesterday’s trading session at $446.02. UNH’s 1.57x forward EV/Sales is 73% lower than the 5.81x industry average. In terms of forward Price/Sales, UNH is currently trading at 1.47x, which is 78.6% lower than the 1.25x industry average.
UNH’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Growth, Sentiment, Stability, and Quality. Click here to see the additional ratings for UNH’s Value and Momentum. Of the 11 stocks in the B-rated Medical – Health Insurance industry, UNH is ranked #1.
Walmart Inc. (WMT – Get Rating)
WMT operates retail, wholesale, supermarkets, other units, and e-commerce websites worldwide. The Bentonville, Ark.-based company operates through Walmart U.S.; Walmart International; and Sam’s Club. In addition, it offers fuel and financial services and related products. It has a market capitalization of $377.76 billion and a a 0.51 beta.
Following the U.S. Food and Drug Administration (FDA) and Centers for Disease Control and Prevention’s (CDC) authorization of Pfizer-BioNTech’s COVID-19 vaccine for…
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