Unexpected Health Costs Impacted UnitedHealth (UNH) in Q4

Bretton Capital Management, an investment management company, released the “Bretton Fund” fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. Bretton Fund returned 1.44% in Q4 2025 compared to 2.66% for the S&P 500 Index. In 2025, the Fund returned 11.58% compared to 17.88% for the Index. Although the market fluctuates daily between excitement and concern regarding a potential bubble in artificial intelligence, the firm views the overall market as not in bubble territory at this stage but is modestly elevated. Given the Fund's long-term perspective, it is acceptable to reduce more speculative elements of the AI boom, which might resemble a bubble, even if this leads to a temporary lag during strong market phases. The Fund is focusing on areas of value that will provide good returns over the long term. Please review the Fund’s top five holdings to gain insights into their key selections for 2025.

In its fourth-quarter 2025 investor letter, Bretton Fund highlighted stocks like UnitedHealth Group Incorporated (NYSE:UNH). UnitedHealth Group Incorporated (NYSE:UNH) is a multinational health benefits company based in Eden Prairie, Minnesota. On March 03, 2026, UnitedHealth Group Incorporated (NYSE:UNH) stock closed at $289.21 per share. One-month return of UnitedHealth Group Incorporated (NYSE:UNH) was 4.82%, and its shares lost 39.24% over the past 52 weeks. UnitedHealth Group Incorporated (NYSE:UNH) has a market capitalization of $261.978 billion.

Bretton Fund stated the following regarding UnitedHealth Group Incorporated (NYSE:UNH) in its fourth quarter 2025 investor letter:

"The main hit to the fund this year was UnitedHealth Group Incorporated (NYSE:UNH), impacting performance by -1.1%, when health costs for its enrollees surged unexpectedly. UnitedHealth had a disastrous 2025. The year began with a leak in February that the Department of Justice had launched an investigation into the company’s Medicare Advantage (MA) coding practices. In March, it actually won an MA coding case dating back to the Obama Administration, but it was a good reminder that investigations are easier to start than to win.

In April, the floor gave way. UnitedHealth announced that its membership, both on the insurance side and on its Optum healthcare services side, turned out to be far sicker and more expensive to treat than the firm had anticipated. The health insurance business is a low margin business that depends on actuarial accuracy: tiny changes in medical loss ratio have a tremendous impact on profitability. In May, UnitedHealth replaced then-CEO Andrew Witty with former CEO Stephen Hemsley, which confirmed that the errors were not the result of a fluke month of bad luck, but reflected poor modeling that would take some time to resolve. By August, the stock that had begun the year at $510 was trading below $240. Hemsley focused on shedding unprofitable customers and righting the ship, and while he said it would take much of 2026 to get back on track, the earnings potential of the franchise was compelling…” (Click here to read the full text)

UnitedHealth Group Incorporated (NYSE:UNH) is in 14th position on our list of 40 Most Popular Stocks Among Hedge Funds. According to our database, 145 hedge fund portfolios held UnitedHealth Group Incorporated (NYSE:UNH) at the end of the fourth quarter, up from 140 in the previous quarter. In 2025, UnitedHealth Group Incorporated (NYSE:UNH) reported revenues of nearly $448 billion reflecting 12% increase from 2024. While we acknowledge the potential of UnitedHealth Group Incorporated (NYSE:UNH) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered UnitedHealth Group Incorporated (NYSE:UNH) and shared SCCM Enhanced Equity Income Fund's views on the company. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.