There are two main reasons insiders invest in their own companies. They either believe that business is about to get better, or that the company is undervalued. Whatever the reason, insider buying tells us that those within the company expect the company’s share price to rise.
Here, we are going to highlight a large insider purchase at UnitedHealth Group Inc (UNH:US). UnitedHealth Group is an American multinational healthcare and insurance company. The company is split into two businesses: UnitedHealthcare and Optum. It is listed on the New York Stock Exchange and currently has a market capitalization of $476.24 billion.
UnitedHealth Group Inc: Insider Buying
Our insider transaction data shows that on February 22, a director at UnitedHealth Group, Paul Garcia, purchased 2,146 UNH shares at a price of $464.97 per share. This purchase cost the insider around $1 million and increased his holding by around ten-fold.
This insider trade is interesting for a couple of reasons.
Firstly, this transaction is for a significant sum of money, which indicates that Mr. Garcia strongly believes in UnitedHealth Group’s prospects. It also raises his stake in the business exponentially, which would further suggest he is very confident in the prospects of the company.
Secondly, Mr. Garcia is a highly respected businessman. As CEO of Global Payments, he drove annual revenues up from $350 million to $2.4 billion during his 14-year tenure. He has also been a director at Truist Financial Corp, SunTrust Banks, and several other companies within the financial sector. This means he is likely to have a good idea of the intrinsic value here.
Strong Revenue Growth
UnitedHealth Group saw good growth across both its businesses during 2021.
Revenue of $287.6 billion was up 11% on the year prior. Meanwhile, the company saw its earnings from operations move up to $24 billion from $22.4 billion a year earlier. Full-year adjusted net earnings grew 13% to $19.02 per share. Due to factors such as the repeal of the health insurance tax, the operating cost ratio fell to 14.8% from 16.2% a year before. The cash flows from operations were $22.3 billion and the return on equity for full-year 2021 was 25.2%, reflecting a strong overall performance by the business.
“Our strong 2021 performance and confident growth outlook for 2022 and beyond reflect the accelerating innovation and expanding capabilities across Optum and UnitedHealthcare,” commented Andrew Witty, CEO of UnitedHealth Group.
Having read through the full-year results, we are of the opinion that the insider buying at UnitedHealthcare is a bullish development. The results are positive and the CEO’s outlook statement exudes confidence. It would seem that the director shares his CEO’s optimism and believes the share price does not accurately reflect UnitedHealthcare’s future prospects.