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Beating the markets doesn’t have to mean spending hours to find an up-and-coming growth stock that no one knows. You don’t have to try and look for the next Microsoft or Alphabet. Large, stable businesses can oftentimes make for some of the safest, most reliable investments you can own. As long as they keep doing what has made them so successful, they can be in good shape to deliver strong returns, and in some cases, even outperform the S&P 500.
One of most consistent market-beating stocks over the past decade has been UnitedHealth Group (UNH 1.70%). Let’s see why.
A good measuring stick for stocks is the S&P 500. And when compared with the broad index, UnitedHealth has done exceptionally well over the past 10 years, outperforming it in all but one of those years:
Data source: YCharts. Chart by author.
The lone blemish for the healthcare stock was in 2019, when the S&P 500 had a terrific year and rose 29% and UnitedHealth couldn’t keep up with its 18% gains.
When looking at UnitedHealth’s financials, there’s little mystery as to why this has been such a solid-performing stock over the years. The health insurance giant has simply found ways to continue to grow both its revenue and bottom line.
UNH Revenue (Quarterly) data by YCharts
The company finished 2022 with $324.2 billion in revenue, up 13% year over year. UnitedHealth simply attributed the growth to “serving more people and by serving them more comprehensively.” One of the ways the business achieves that is by expanding its capabilities through acquisitions.
Last year, it acquired Change Healthcare, a technology healthcare company that UnitedHealth says will help simplify processes and result in lower costs and less friction for the health system. It’s also in the process of acquiring home health company LHC Group. That deal could close before the end of the first quarter of this year.
With strong financials that enable UnitedHealth to pursue acquisitions, the company is able to continue to find ways to strengthen and diversify its business. And the stock’s impressive performance over the years is a key reason why its dividend yield of 1.3% looks so underwhelming.
Heading into a potential recession this year, investors could be looking for safety and stability. And with a strong track record plus a growing dividend, UnitedHealth can be a stock that garners a lot of attention from risk-averse investors. Last year, the stock was up more than 5% amid the bear market. Those are decent gains considering how badly the S&P 500 did, falling by 19%.
But even if UnitedHealth’s stock doesn’t outperform the market this year, its track record suggests investors don’t need to worry about the safety of its business in the long run. With its stock trading at 23 times earnings, its valuation is in line with that of the average healthcare stock. And arguably, UnitedHealth should be trading at a premium given the strength of its business.
Whether you’re a dividend investor or growth-oriented investor, UnitedHealth can make for a solid stock to buy and hold this year and beyond.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, LHC Group, and Microsoft. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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