Battered healthcare giant UnitedHealth Group (UNH) has fallen on hard times. After reaching an all-time high of $630.73 per share in March, shares of the country's largest health insurer plummeted 53% and today UNH stock trades below $300 a stub.
A big earnings miss, its new CEO abruptly resigned, it withdrew its full-year earnings guidance, and a Wall Street Journal report – denied by UNH – that the insurer was under criminal investigation by the Justice Dept. conspired to send the shares lower. Yet that hasn't deterred members of Congress from piling into UNH stock, scooping up shares in multiple purchases.
We know politicians have an uncanny knack for buying and selling stock at just the right time and their performance consistently beats the market. Although they swear they aren't trading on information they receive from their oversight responsibilities of the companies they regulate, they also refuse to pass laws prohibiting them from trading while in office.
Since Congress is seemingly suddenly bullish about UNH stock, should you join them in buying the beaten down insurer?
The website Unusual Whales tracks the trades politicians make. Its data shows that right up to UNH's disastrous earnings report, Congress was a net seller of UnitedHealth stock. While there were some, like California Democrat Ro Khanna who made a purchase worth between $15,000 and $50,000 just two days before UNH released its financials, most other politicians were selling.
Following the report, though, and as recently as May 16, according to the most recent available reports, representatives were in buying mode again. Did they just think as many others did that UNH stock was just too cheap to ignore, or did they possess some special knowledge that the insurer's fortunes were poised to change?
Georgia Republican Marjorie Taylor Greene, who has also routinely beat Wall Street at its own game with uncannily timed trades – she outperformed the S&P 500 last year by seven percentage points with a 30.2% return – was in there buying UNH over several days.
On May 14, she bought between $15,000 and $50,000 worth of UNH stock, and came back two days later to buy another tranche worth $1,000 to $15,000. That was the same day UNH's new CEO Stephen Hemsley bought $25 million worth of stock and CFO John Rex bought $5 million worth. Three UNH directors also bought a combined $1.59 million worth, with one buying over $1 million in stock.
In all, there were five separate congressional purchases of UNH since the insurer's earnings report and just two sales.
I could be wrong, but in this instance, I don't think the politicians are trading on insider information, but felt the premier health insurer was simply a deeply discounted stock.
Just last week, despite the congressional purchases, the U.S. Centers for Medicaid & Medicare Services (CMS) announced a major expansion of its audit of Medicare Advantage (MA) plans in a bid to crackdown on overbilling and clawback misappropriated funds between 2018 and 2024.
UnitedHealth is the largest provider of MA plans with over 8 million customers.
Separately, The Guardian reports UNH is caught up in a kickback scheme that compromised patient care even as it helped the insurer win new Medicare enrollees.
This is why I maintain investors should remain on the sidelines with UNH stock. Although I still believe in the long-term potential of the company, a possible DOJ investigation, a CMS audit that could result in potentially billions of dollars in payments, and charges of impropriety just make it too risky to buy now.
