UnitedHealth Group is a terrific business whose scale and sophisticated use of technology give it significant competitive advantages. It is growing rapidly and has been a Wall Street favorite (i.e. too expensive for us) for most of the last 10-15 years. We were able to buy it last year during a period of weakness when the threat of shrinking profit margins frightened investors. As those fears faded and the stock returned to our estimate of intrinsic value, we sold most of our shares. During the 2nd quarter of this year, a competitor?s disappointing results and investigations into UnitedHealth?s option granting practices led to a decline of over 30%. We believe that investors have over-reacted and that at $45, or 12-13 times 2007 earnings, the stock is very attractive.
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