You probably own a lot more of this one high-flying health insurer than you realize, tucked away inside your favorite funds.
Even if you feel diversified, a single stock can quietly become a concentrated position inside the funds you own. UnitedHealth (UNH), a health insurance and services giant, now trades about 25% above its 200-day moving average, a sign of a powerful run-up that has likely pulled your portfolio along with it, whether you chose to buy the stock or not.
A stock running far ahead of its own long-term trend is worth a closer look. Over the past year, the stock has returned +50%, with much of that coming in the last three months, which saw a +31% gain. Investors are paying for that performance. The stock trades at about 22 times its expected earnings for the year ahead, pricing in expectations that profits will continue to grow. The question for a fund investor is how much of this single company's story you now own indirectly.
UnitedHealth is a popular holding, found across 52 of the equity funds in our universe. But the concentration varies widely. The iShares U.S. Healthcare Providers ETF (IHF) holds UNH at about 22% of the fund. That heavy weight helped power its +31% return over the past year. The exposure is common even in broader funds. The State Street Health Care Select Sector SPDR ETF (XLV) holds it at about 6.6% of the fund, and the Vanguard Health Care ETF (VHT) holds it at about 5.6%. Even dividend-focused funds like the Schwab U.S. Dividend Equity ETF (SCHD) have a meaningful position, holding UNH at about 4.4% of the fund.
This concentration cuts both ways. Let's run a simple scenario, not a forecast: if UNH simply reverted to its 200-day average, it would drop about 20% from here. For the heavily concentrated iShares U.S. Healthcare Providers ETF (IHF), that one stock's move would erase about 4.3% from the entire fund's value. For the State Street Health Care Select Sector SPDR ETF (XLV), the drag would be about 1.3%. For the Vanguard Health Care ETF (VHT), it would be about 1.1%.
#year
Even if you feel diversified, a single stock can quietly become a concentrated position inside the funds you own. UnitedHealth (UNH), a health insurance and services giant, now trades about 25% above its 200-day moving average, a sign of a powerful run-up that has likely pulled your portfolio along with it, whether you chose to buy the stock or not.
A stock running far ahead of its own long-term trend is worth a closer look. Over the past year, the stock has returned +50%, with much of that coming in the last three months, which saw a +31% gain. Investors are paying for that performance. The stock trades at about 22 times its expected earnings for the year ahead, pricing in expectations that profits will continue to grow. The question for a fund investor is how much of this single company's story you now own indirectly.
UnitedHealth is a popular holding, found across 52 of the equity funds in our universe. But the concentration varies widely. The iShares U.S. Healthcare Providers ETF (IHF) holds UNH at about 22% of the fund. That heavy weight helped power its +31% return over the past year. The exposure is common even in broader funds. The State Street Health Care Select Sector SPDR ETF (XLV) holds it at about 6.6% of the fund, and the Vanguard Health Care ETF (VHT) holds it at about 5.6%. Even dividend-focused funds like the Schwab U.S. Dividend Equity ETF (SCHD) have a meaningful position, holding UNH at about 4.4% of the fund.
This concentration cuts both ways. Let's run a simple scenario, not a forecast: if UNH simply reverted to its 200-day average, it would drop about 20% from here. For the heavily concentrated iShares U.S. Healthcare Providers ETF (IHF), that one stock's move would erase about 4.3% from the entire fund's value. For the State Street Health Care Select Sector SPDR ETF (XLV), the drag would be about 1.3%. For the Vanguard Health Care ETF (VHT), it would be about 1.1%.
#year
3 months ago
