F. William “Bill” McNabb III, the former chairman and CEO of investment giant Vanguard Group, has made a bold purchase of
Group stock (UNH). McNabb serves as a director on the board of the diversified health-care company.
McNabb paid $1.5 million on May 1 for 6,430 UnitedHealth shares, an average per-share price of $233.21. He now owns 7,879 shares, according to a form he filed with the Securities and Exchange Commission.
UnitedHealth didn’t immediately respond to a request to make McNabb available for comment on his stock purchase.
Not only was it McNabb’s first purchase of UnitedHealth stock on the open market as a director, it was the first by any of the company’s insiders in five years. Former director Rodger Lawson, who left UnitedHealth’s board in 2018, was the last company insider to buy stock on the open market, paying $76,210 for 1,000 shares on April 24, 2014.
According to UnitedHealth’s latest proxy, McNabb wasn’t required to buy stock this early into his service. Nonemployee directors have five years to meet the company’s stock-ownership guidelines, which specify ownership equal to five times the directors’ annual base cash retainer of $125,000. A director’s stock ownership may include vested deferred stock units, or DSUs. Nonemployee directors currently receive each year $205,000 in DSUs that are issued quarterly and vest immediately upon grant.
It seems possible, then, for a nonemployee director to meet the stock-ownership requirements without ever buying UnitedHealth stock on the open market. McNabb not only met the requirement early, he more than doubled the $625,000 expected ownership level.
UnitedHealth stock is in the red for 2019. As of Friday’s close of $231.95, shares sport a year-to-date loss of 6.9%. Last month the company reported upside first-quarter earnings and lifted guidance, but that didn’t have a lasting effect on the stock. Barron’s has noted that UnitedHealth stock offers strong dividend growth.
McNabb stepped down as the CEO of Vanguard in January 2018 and joined UnitedHealth’s board the next month. Vanguard has a large investment in UnitedHealth. Its 71.5 million UnitedHealth shares represent a 7.5% stake, according to S&P Capital IQ, making Vanguard the second-largest holder in the company.