Bretton Fund / Bretton Capital Management, LLC on UnitedHealth Group Incorporated
Thesis
UnitedHealth suffered a severe drawdown after unexpectedly high healthcare usage and a push into unprofitable business damaged results. Management has responded by raising rates to reflect higher utilization and exiting markets where it could not earn acceptable returns. Bretton added to the position after the selloff, and the stock subsequently rebounded sharply. The fund believes the turnaround still has further room to run.
“We bought more after the stock tanked, and it has since rebounded, returning 37% over the past year and 80% off its lows.”
Key risks
- Healthcare utilization remains higher than expected
- The company again pursues business or markets that do not generate adequate profitability