Why UnitedHealth Stock Pushed Higher on Monday

Key Points

• An analyst raised his price target on the stock by 12%.

• He's not recommending it as a buy, however.

• 10 stocks we like better than UnitedHealth Group ›

UnitedHealth Group (NYSE: UNH), by far the health insurance stock that's gotten most of the market's attention over the past few trading sessions, had a good Monday on the exchange. Its shares added nearly 2% in value that trading session on news of an analyst's price target raise. That bump was high enough to top the S&P 500's (SNPINDEX: ^GSPC) flatline performance.

The Berkshire bump

UnitedHealth was a star stock late last week, when it was revealed that Warren Buffett's Berkshire Hathaway had taken a $1.6 billion stake in the company's equity. On Monday, lingering positive sentiment on UnitedHealth was boosted by that price target bump.

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Image source: Getty Images.

It came from Bank of America Securities' Kevin Fischbeck, who made a fairly generous lift in his fair value assessment to $325 from his preceding level of $290. This didn't make him a bull on the stock, however, as he held fast to his existing neutral recommendation.

Interestingly, according to reports, Fischbeck's move wasn't necessarily based on the Buffett team's entrance into the stock. The Berkshire buy, according to the analyst, is merely confirmation that the company is undervalued. In his view, UnitedHealth and other big companies that run managed care organizations (MCOs) have seen only temporary slumps in profitability lately.

Not a great pick for the short term

Given that, wrote Fischbeck, investors patient enough to hold UnitedHealth for five years or so could see meaningful share price gains. The pundit feels that the company doesn't have good prospects for achieving this within a shorter time frame -- a key reason for maintaining his neutral stance.

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Bank of America is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.