r/valueinvesting
Selling UNH at 31x P/E to rotate into beaten-down quality tech/software?
Author plans to sell UNH at 31x P/E due to valuation and regulatory risks, rotating into beaten-down tech/software like ADBE and INTU.
- Capital rotation into beaten-down, high-moat tech/software compounders offers better risk-reward at historically low multiples.
- UNH's massive size and recurring regulatory risks create high downside risk at an elevated 31x P/E multiple.
Hi everyone, I’m up 45% on UNH with an entry price of $298 . At the current $427, it trades near 31x P/E, well above its historical 18x-22x mean. Given its massive size and recurring regulatory risks, I feel the upside is capped and downside risk is high at this multiple. I’m thinking of selling to reallocate capital into beaten-down, high-moat compounders trading at historically low multiples, specifically SPGI , MELI , ADBE and INTU.Does this capital rotation make sense to you, or am I crazy for exiting a proven winner? Thanks!
I thought about the same thing myself. But I really like a quote from Peter Lynch that went something like:"Don’t cut your flowers and water the weeds."
I’d let my winners run. I think UNH is still an incredible compounder, not less valuable than beaten down tech.
I could be very wrong though 😅
That’s very true , infact it could be a huge mistake that’s why im so confused.
I truly believe UNH will perform great in the next couple years but to be honest i see the names that I mentioned above as a better risk/ reward opportunities .
I could be very wrong too 😅
Trim the flowers. Take some profit and you can reinvest it in whatever you have the strongest conviction on.
SPGI could be interesting
In 6 years, PE will be 11. it’s all priced in. We have an aging and unhealthy population. It’s good long term hold. Don’t sell your performing stock
It’s smart decision, sell unh and you should definitely buy baba. It’s extremely undervalued right now
Yeah i think Baba its a great company but i feel is a garbage/ shit/ rigged stock .
Idk why but i think is better to stay away from chinese companies
Then how did UNH turn around? Wasn’t it a loser at one point?
I really like all 4 names you mentioned, for different reasons.
MELI has a huge runway for growth and an exceptionally good management team. They are also incredibly deeply embedded in the LatAm economy, not too many business out there can monetize the same transaction 5 or 6 times.
SPGI has huge pricing power (within reason, looking at you FICO). They've been lumped into the AI fears group by virtue of their analytics business, but you could write that segment off as a zero and shares would still be trading at a reasonable valuation. The index and credit rating businesses are elite.
ADBE and INTU fall into a similar basket. They have low end business that are under attack from cheaper alternatives (AI or otherwise), which has caused a sell off to shockingly cheap multiples. But in both cases, the majority of their businesses are tied to much more stable customers, with Adobe's enterprise suite and Intuit's QuickBooks not in any immediate danger. Basically, they've gotten to a price where you don't even have to assume almost any growth to get a good return, and if the coming years maintain similar growth rates and margins to what we've seen recently, the stocks will do very, very well.
Nice picks!
I’ve been rotating out of my UNH and CNC positions to buy MSFT, META, and NOW calls. I’m up like 80% on CNC plus another 210-280% on CNC leaps I bought. Not really interested in the sector anymore. Gonna keep some money in these stocks but not a lot. In for 334 shares of MSFT now and 91 shares of META. I have more faith in these companies hitting ATHs again than health insurance with all the political troubles. Margins in health insurance suck. Been wanting to own more tech for a while now so it seemed like the right move. Doesn’t hurt to lock in some profits either
I would rotate into Adobe fantastic balance sheet plus one of their directors just bought \~2mil worth of stock on the open market today.
UNH’s op margins were depressed in 2025 (\~5.5%) vs where they were historically (8.5% avg last few years). Of course the PE looks high, cos the E is temporarily depressed. They’re making good progress to restore margins, that’s why the stock has rebounded nicely cos investors are pricing in the margin recovery.
At normalized margins, UNH will earn closer to $27/share so at its historical 20x PE, the stock should be at $540 before the margin rebound re-rating is done.
Thereafter, it should be a 10%+ growth compounder: 6-7% organic growth, additional 2% EPS growth from shrinking share count due to stock buybacks, and another 2% from dividend re-investment.
Let your winners run; UNH doesn’t get overvalued like the rest of the market until maybe $700 (being 25x PE on $27 norm EPS = $675).
I was thinking the same thing about selling some of my UNH to reallocate into other positions but I find myself wondering if that really is the best play.
UNH hasn't even finished their turn-around. we're at the starting line, the thesis when buying at low levels was that UNH could stabilize their earnings and expand their margins. Given the current management and last earnings I have no reason to believe they can't continue to execute.
The biggest killer of YOY% growth is selling your winners in favour of a new stock/thesis when nothing is inherently wrong with the company or when valuations aren't egregious.
When selling you have to be right twice, that UNH from here on out gives average to slightly lower average returns and that the stock you buy will outpace it and the market. I've flipflopped on whether to sell UNH or not a lot recently, and I think unless a play is really attractive/obvious it just isn't worth it. We do not have to be involved in every play we see.
What do the casual users matter if Adobe is still growing? Not like casual users bring much revenue anyway.
With a time horizon of "a couple of years", why not staying with UNH. I think your 50% narrative is true for both companies, especially when UNH reclaims previous highs which is very likely to be "in a couple of years"