Sell: UnitedHealth Group (NYSE:UNH)
We are exiting our position in UNH. The company is counting on spending less per member by cutting benefits and offloading patients who are too expensive to treat in order to improve profitability. This is easier said than done, especially with the Trump administration being very unfriendly toward the sector. Given the recent increase in price, valuation, and analyst expectations, it appears the market has fully bought into the turnaround story. We, on the other hand, are not so sure.
Buy: Costco Wholesale (NASDAQ: COST)
We are initiating a position in Costco. The company is arguably the most recession-resistant retailer in the market. If the economy weakens, consumers flock to Costco for value; if the economy strengthens, they flock there for large discretionary items. The company is growing its market share, membership renewal rates are at all-time highs, and the annual fee hike from late 2024 will provide a profit tailwind for the next couple of years as memberships lapse and renew.
