U.S. President-elect Donald Trump’s election victory sent shockwaves through the stock market, leaving investors scrambling to figure out which sectors and stocks would benefit. Aaron Dunn, portfolio manager of Morgan Stanley’s U.S. Value Fund, noted that there was “tremendous volatility” following the election results as the market repriced a “50/50 election.” Dunn, who is also Morgan Stanley’s co-head of value stocks, told CNBC’s “Squawk Box Asia” on Tuesday that he had identified three stocks he was betting on after the election results. UnitedHealth Group, which provides health insurance plans and services, is also on Dunn’s list. The value investor noted that Medicare Advantage reimbursement rates are “under pressure in the Biden administration.” Reimbursement rates determine how much an insurance company can charge for monthly premiums and plan benefits. “Now that Trump is in office… the outlook for managed care is very positive because reimbursement rates are going to be… better,” Dunn explained. He is also bullish on UnitedHealth’s earnings growth and its health insurance, prescription and healthcare services businesses. . Its shares are up about 17% so far this year. “In our view, the stocks you own have become a lot cheaper… It’s a diversified investment and you’ll get it at a slightly above market multiple with solid growth track,” Dunn added. FactSet data shows that 26 of 30 analysts covering the stock have buy or overweight ratings. The average analyst price target is $626.44, which implies potential upside of approximately 2%. Central America Apartment Communities Dunn Chooses to Invest in the U.S. Real Estate Industry Central America Apartment Communities “Most real estate trades immediately following the election (consistent with other rate-sensitive industries). However, MAA offers a solution to America’s housing supply problem,” he said. However, MAA shares are up 19% so far this year. Ten of the 25 analysts covering the stock have buy or overweight ratings, 13 have hold ratings and two have sell ratings, according to FactSet data. The average analyst price target is $163.26, giving the stock 2% upside potential. NextEra Energy In the energy space, Dunn is betting on NextEra Energy, the “world’s largest developer of renewable energy projects,” which sold off following the election results. Trump has vowed to cut renewable energy subsidies and favor the oil and gas industry, but Dunn said the market may be overestimating the changes Trump will make with the Inflation Reduction Act and renewable energy initiatives. Shares of NextEra Energy are up about 22% so far this year, and the stock trades at a price-to-earnings ratio of about 22 times. “This is a company that’s going to have high single-digit earnings growth for at least the next couple of years,” Dunn said. “From a technology perspective, they’re the leader in the space.” He added that given the artificial intelligence data center growth, the company should raise its long-term growth rate guidance. FactSet data shows that 15 of the 24 analysts covering the stock have given it a buy or overweight rating, with an average price of $88.28. This gives it ~19% upside potential.
