Shortly before the closing bell, we will be buying 200 shares of United HealthCare Group (UNH) at roughly $215.03. In addition, we will be buying 25 shares of 3M (MMM) at roughly $210.20. Lastly, we will be buying 100 shares of Abbott Laboratories (ABT) at roughly $57.82. Following the trade, UNH, 3M, and ABT will represent 1.65%, 3.43%, and 2.00% of the portfolio, respectively.
We have long been fans of United Healthcare as the company is a strong defensive name that we believe will perfectly fill the healthcare sector void once we get some relative strength in Allergan (AGN) and are able to close out our position (as is our intention given our Three rating). Furthermore, with some macroeconomic readings coming in a tad below consensus (as was the case with this morning PMI report), as we noted in our February Members' only call, "we sense any downshift in the economy, it's UnitedHealth. They would be the principle beneficiary of a slowdown."
And while we still believe there is more room to run, we want to take advantage here to initiate a position at a level at which the stock has seen support in the past and get ahead before those who get ahead. We also note that shares are down significantly from there they opened, as the broader market has overcome the positive Walmart (WMT) /Humana (HUM) news that initially pushed shares higher.
Lastly, we also remind members that UNH stands to be a beneficiary of corporate tax reform as the company had previously sported an effective tax rate in the upper-20%s and pointed to reform as a reason to boost its profit outlook back in January of this year. In the interest of time, we are keeping it short and will follow up on the name in more detail soon.
We will be initiating our position in UNH with a price target of $260, which reflects roughly 18.5 times consensus 2019 earnings estimates.
As for 3M, we have patiently waited and waited before buying more, and with the shares now down $50 from its highs, we believe we are getting an attractive level here. Though shares have been pressured because of its exposure to China, we remind members that the region only represents 10% of the company's revenues. Also, we must recognize that incoming CEO Mike Roman recently acknowledged a slower March; however, he maintained the full-year guide and this should smooth the company's results.
Lastly, with shares of ABT now back well below $60, we view this as an opportunity to add shares in a high-quality medical devices name. The company routinely produces double-digit earnings growth which we expect will continue in 2018 as the company has several products (FreeStyle Libre, Alinity System, Confirm RX Insertable Cardiac Monitor, and HeartMate 3 system) that are either new to launch or will launch soon in the US.
Elsewhere in the market, we are eyeing Emerson Electric (EMR) , and if Intel (INTC) falls more we are going to do more work because it has become a cheap stock again. Through our trades today, we diversified the portfolio away from expensive and dicey/hated tech, and we now have the opportunity to add non-tech and cheaper tech at discounts.