2 Beaten-Down Stocks With Incredible Upside Potential

Key Points

• UnitedHealth Group should be able to correct the problems that caused most of its decline.

• Vertex Pharmaceuticals' positives outweigh its negatives.

• 10 stocks we like better than UnitedHealth Group ›

What goes up can come down. Most investors have experienced this first-hand with stocks in their portfolio. But can what comes down go back up? In many cases, the answer is a resounding yes.

Steep declines in share prices can often present great buying opportunities for long-term investors. I think such opportunities exist right now. Here are two beaten-down stocks with incredible upside potential.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

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1. UnitedHealth Group

Shares of UnitedHealth Group (NYSE: UNH) have plunged roughly 50% below the high from earlier this year. Pretty much everything that could go wrong for the health insurance stock has gone wrong.

In April, UnitedHealth Group announced disappointing first-quarter results and lowered its guidance for the full year. Less than one month later, the company suspended its full-year outlook altogether and named a new CEO after the unexpected departure of former CEO Andrew Witty.

That wasn't the only bad news. The Wall Street Journal reported in May that the U.S. Department of Justice was conducting civil and criminal investigations into UnitedHealth Group's Medicare billing practices. The company confirmed in July that those investigations were indeed underway.

But UnitedHealth Group is in good hands with former longtime CEO Stephen Hemsley back in charge. The company's current financial woes stem from higher-than-expected medical costs, particularly with its Medicare Advantage plans. Those issues can be resolved by increasing premiums, which is exactly what UnitedHealth plans to do in 2026.

Sure, the dark cloud related to the DOJ investigations will continue to hover over the company's head for a while. A previous federal probe lasted a decade. However, no evidence of wrongdoing was found in that investigation. UnitedHealth Group seems to believe there will be a similar outcome this time around, with the company stating that it "has full confidence in its practices."

Billionaire investors Warren Buffett and David Tepper, along with Michael Burry of The Big Short fame, bought shares of the healthcare giant in the second quarter of 2025. They undoubtedly view UnitedHealth Group's valuation as attractive, with its price-to-earnings ratio at its lowest level in years.

I suspect Buffett, Tepper, and Burry are right about UnitedHealth Group's prospects. Once the company's earnings begin to grow again next year, this beaten-down stock could rebound strongly.

2. Vertex Pharmaceuticals

Vertex Pharmaceuticals (NASDAQ: VRTX) was on a roll earlier this year. However, that momentum is now long gone. The biotech stock has fallen more than 20% below its March 2025 peak.

The first warning sign for Vertex came in May with the company's weaker-than-expected first-quarter results. Revenue was lower than analysts had predicted, primarily due to the sale of copycat versions of the company's cystic fibrosis (CF) drugs in Russia, which negatively impacted sales.

Vertex announced two pipeline setbacks earlier this month. Experimental pain drug VX-993 failed to meet the primary endpoint of a phase 2 clinical trial. The company also revealed that the U.S. Food and Drug Administration (FDA) didn't see a path forward for a broad label for Journavx in treating peripheral neuropathic pain (PNP).

While this news was disappointing, Vertex has more positives than negatives. Journavx's U.S. launch is going so well that the company is beefing up its commercialization efforts. Its newest CF therapy, Alyftrek, continues to gain steam in the market. Both Journavx and Alyftrek should become huge blockbuster drugs for Vertex in the not-too-distant future.

Vertex's pipeline prospects still look promising, too. The biotech company expects to file for global regulatory approvals of type 1 diabetes therapy zimislecel and for FDA accelerated approval of povetacicept in treating IgA nephropathy next year. A late-stage clinical study is also in progress for inaxaplin targeting APOL1-mediated kidney disease. And while the FDA poured cold water on a broad PNP label for Journavx for now, Vertex is moving ahead with phase 3 studies to try to win approval in painful diabetic peripheral neuropathy.

The consensus Wall Street 12-month price target for this biotech stock reflects an upside potential of over 21%. If Vertex's approved products and pipeline candidates fulfill their promise, its stock should be able to skyrocket much more than that over the next few years.

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Keith Speights has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.