Goldman Sachs Just Added UnitedHealth (UNH) to Its Conviction List. Here's Why the Stock Could Soar.

Goldman Sachs (NYSE: GS) ranks among the Wall Street elite. When the investment bank likes a given stock, it's a big deal. But when Goldman Sachs puts a stock on its conviction list, it's a really big deal.

Last week, Goldman Sachs added UnitedHealth Group (NYSE: UNH) to its U.S. conviction list. UnitedHealth Group is the largest U.S. health insurer and the world's fourth-largest healthcare company by market cap. However, its stock has taken investors on a rollercoaster ride over the last 18 months.

But a top Wall Street firm now believes UnitedHealth is one of the best stocks on the market to buy. Here's why that confidence could be well-placed.

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Why is Goldman Sachs bullish about UnitedHealth?

The main reason Goldman Sachs added UnitedHealth Group to its conviction list relates to Medicare Advantage. UnitedHealth served more than 7.5 million Medicare Advantage members as of March 31, 2026. Goldman Sachs believes the giant health insurer is approaching an inflection point in its underwriting cycle for these plans, which should lead to bottom-line improvement.

Much of the volatility in UnitedHealth Group's shares last year stemmed from higher-than-expected Medicare Advantage plan costs. UnitedHealth even had to temporarily withdraw its full-year guidance due to the cost overruns. The volatility in the health insurance stock in 2026 was primarily due to the Centers for Medicare & Medicaid Services (CMS) proposing a minuscule rate increase for Medicare Advantage providers in 2027.

However, neither issue is as worrisome now. UnitedHealth exited Medicare Advantage markets in 109 counties across 16 states that weren't profitable enough. These moves helped the company reduce its overall medical cost ratio by 90 basis points year over year in the first quarter of 2026. Also, CMS issued final 2027 Medicare Advantage rate increases that were much higher than its initial proposal.

UnitedHealth's improving Medicare Advantage prospects aren't the only reasons why Goldman Sachs favors the stock, though. The company's Optum unit also has strong growth opportunities despite facing some temporary headwinds.

Why UnitedHealth stock could soar

Goldman Sachs' 12-month price target for UnitedHealth reflects potential upside of around 12% above the gains achieved over the last six weeks. The investment bank isn't the only Wall Street firm that views the stock favorably. Of the 28 analysts surveyed by S&P Global (NYSE: SPGI) in May, 22 rated UnitedHealth stock as a "buy" or "strong buy."

One key reason UnitedHealth Group stock could soar even further is that its valuation remains attractive. The health insurer's shares trade at 20.8 times forward earnings, well below the stock's average earnings multiple of 23 over the last 10 years.

UnitedHealth's earnings growth could also drive its share price higher. Goldman Sachs appears to be right about the company nearing the bottom of its Medicare Advantage underwriting cycle. Patrick Conway, who heads UnitedHealth's Optum business, said in the first-quarter earnings call that OptumHealth's margins should "steadily improve" in 2026 and "accelerate into 2027."

The stock could also benefit from overall market uncertainty. There's no clear end in sight to the Iran war. Higher energy prices have renewed fears about resurging inflation. A new Federal Reserve chair with sharply different ideas about the central bank's role than we've seen in previous years could push for policy changes that increase volatility. Many investors could view UnitedHealth Group as a good defensive play.

Billionaire investors like UnitedHealth, too

UnitedHealth Group also has fans beyond Wall Street. Some billionaire investors like the stock, too.

Warren Buffett initiated a position in UnitedHealth for Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) last year during the health insurance stock's sharp pullback. David Tepper's Appaloosa Management hedge fund owns a stake in UnitedHealth. Paul Tudor Jones loaded up on the stock for his Tudor Investment fund's portfolio in the fourth quarter of 2025.

Of course, investors shouldn't buy any stock solely because Wall Street and billionaire investors own it. However, understanding the underlying reasons they like a stock can help find great picks -- like UnitedHealth Group.

Keith Speights has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway, Goldman Sachs Group, and S&P Global. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.