The Market —
First, let’s all get on the same page about the market thus far in 2022.
The S&P 500 (top 500 stocks — supposed to be very stable) traded down -10% within the first three weeks of the year. We then traded up +6% the following five days, back down -8% the following three weeks, and now up and down the last few weeks.
I think it’s safe to say the market is all over the place this year — which is totally understandable. We’ve received confirmation on rate hikes to slow what seems to be uncontrollable inflation. We’ve seen Russia invade Ukraine, which came with a slew of economic consequences. Now to put the cherry on top, we’re hearing rumors of yet another COVID strain — BA.2. To remind everyone, my investing strategy is simple.
Invest into growing companies at fair valuations who are operating within secular growth trends.
—
UnitedHealth Group (UNH)
Let’s put an example around this — UnitedHealth Group (UNH), the largest position in my portfolio ($21K, 8% total weighting), is a massive healthcare company ($490B) offering consumer-oriented health benefit plans, access to health providers, software and analytics products for hospital systems, and pharmacy services.
The company has done an incredible job growing revenue, profits, and most importantly — free cash flow — over the last several years.
In my earnings update, I shared with you all the company’s guidance toward a +17% year-over-year increase in free cash flow to $21 billion. The main “secular growth trend” driving this FCF increase is the shift toward Medicare Advantage. If you’re a healthcare nerd like myself, you’re likely familiar. If you’re not — long story short is that people want more flexible access to healthcare, and UNH will be able to provide that for them.
Specifically, this is the “secular growth trend” I’m talking about.
In 2020, there was around 24 million people enrolled in Medicare Advantage. In 2021, this number jumped to 26 million people. I’m sure 2022 will inch us closer to that 30 million mark.
I’m excited for UNH’s future, their free cash flow growth, and keeping them (for now) as my largest holding.
Let’s break down where my portfolio is today, where it’s heading, and what we think are the most critical things to consider are for the remainder of 2022. I’ll publish another quick post to confirm what I purchased this week and at what prices. I’ll also add these buys to the buys / sells tab within the Google Sheet.