There’s a strange comfort in watching the market punish great companies. Not because they deserve it. They rarely do. But because dislocations often offer the long-term investor a gift: the opportunity to own quality at a fair price.
Today, we look at three such names, UnitedHealth Group (UNH), Fair Isaac Corp (FICO), and Thermo Fisher Scientific (TMO). Each is a proven compounder that’s been sold off sharply. In all three cases, the issues are real, but the selloff may be creating opportunity. Quality companies don’t go on sale often. Here are three that just did.
UnitedHealth Group (UNH): Perfect Storm, But Still a Fortress
Drawdown: Down 52% from 52-week highs
Valuation: 13x P/E vs. industry average of 19.4x; 0.7x P/S vs. five-year average of 1.4x
Why it’s fallen
UnitedHealth has been caught in a perfect storm that has given the market pause. The company surprised investors with what its CEO called an “unusual and unacceptable” quarterly earnings miss, driven by higher-than-expected medical costs, particularly in its Medicare Advantage business. Initially, it lowered 2025 EPS guidance from $29.50–$30.00 to $26.00–$26.50, a rare downgrade for a company known for steady execution. Just weeks later, UNH withdrew its full-year guidance altogether, signaling that the headwinds were not yet under control.
That decision came with ongoing scrutiny, including multiple Department of Justice investigations into UnitedHealth’s Medicare billing and antitrust practices. Adding to the turmoil, the tragically killed UnitedHealthcare CEO Brian Thompson’s successor, Andrew Witty, resigned suddenly for “personal reasons.” For a company long viewed and priced as a pillar of stability, the combination of earnings pressure, regulatory scrutiny, and executive turnover has shaken investor confidence.
Why it’s compelling
Stripping away the noise, UNH remains a free cash flow machine with one of the most defensible moats in healthcare. The company provides health coverage to 51 million Americans and controls an estimated 15% of the U.S. health insurance market. By combining insurance with Optum’s suite of pharmacy, data, and care delivery services, UNH has created a vertically integrated ecosystem. This combination is the foundation for a moat that drives efficiency, pricing leverage, and scale advantages across its businesses.
As a result of recent headlines, UNH’s stock has priced in a dire outcome, now trading at just 13x forward earnings. This multiple is not only well below the healthcare industry average of 19.4x, but also meaningfully below its own 10-year average which is closer to 20x. Its 0.7x price-to-sales multiple is also just half its five-year average. That kind of discount doesn’t show up often in businesses this dominant. Meanwhile, the dividend yield has crept up to 2.85%, near a decade high.
Likely outcome
While there are real issues that need to be worked out, UnitedHealth’s dominant position isn’t a fluke. It’s the result of decades of scale-building, data accumulation, and vertical integration.
Despite the current storm, its fundamentals remain intact. Yes, medical costs have surged, but much of the inflation is tied to deferred procedures post-COVID and a normalization of patient volume; not a structural failure in underwriting or pricing. These trends tend to revert as actuarial models adjust and pricing resets.
As for the investigations, even if fines or compliance measures result, history suggests these types of probes tend to be absorbed rather than disruptive. This will most likely be the case especially for companies with the scale and legal infrastructure UNH has. Meanwhile, Optum continues to grow across pharmacy, analytics, and care delivery, which offers an increasingly diversified revenue stream.
And while leadership transitions are never ideal, the return of former CEO Stephen Hemsley to the board offers stability in a moment of uncertainty. The point is that UNH is not going anywhere, and at this price, investors with a long view are being offered an entry point not seen in years.
Fair Isaac Corp (FICO): Great Moat, Regulatory Tantrum
Drawdown: Down 40% from 52-week highs
Valuation: 55x forward P/E; 20x P/S reflecting monopoly premium
Why it’s fallen
The selloff was sparked by a tweet from FHFA Director Bill Pulte. He said he was disappointed by FICO’s cost increases and asked why some credit reports “cost double” under President Joe Biden compared to what they did when Donald Trump was first in office.
Pulte’s comments raised fears that the FHFA might reduce or eliminate FICO’s dominance in this space by shifting from tri-merge to bi-merge credit scoring. In plain terms, this means mortgage lenders would no longer be required to pull credit reports from all three major bureaus. That could lead to fewer transactions involving FICO’s scoring model, and a hit to its per-unit revenue. It could also open the door for alternative scoring models, like VantageScore or in-house tools used by fintechs, to gain share. This would be the first meaningful threat to FICO’s moat in decades.
The market’s reaction was quick and brutal. FICO dropped 16% in a single day. Still, while the regulatory threat is real, the reaction was exaggerated, driven in part by how richly valued the stock was heading into the news.
Why it’s compelling
FICO is a toll booth in American consumer credit. With an estimated 90% market share in credit scoring, it has unique pricing power that rivals regulated utilities. Its business model benefits from high switching costs, entrenched adoption by lenders, and robust data advantages. With gross margins approaching 80%, FICO consistently generates strong free cash flow. And outside credit scoring, its analytics software and decision-management tools continue gaining traction.
These are compelling characteristics of a quality company. From a valuation perspective, the stock has rarely looked cheap, and it still doesn’t, trading at roughly 55x forward earnings. But what makes this moment compelling is the setup. FICO rarely drops this far, this fast. A drawdown to this extent in a monopolistic business with few real threats is rare. That kind of move justifies a closer look.
Likely outcome
Absent a fundamental policy overhaul, FICO’s central role in the credit ecosystem likely remains intact. While regulatory pressure introduces uncertainty, the proposed bi-merge model is far from a foregone conclusion. Even if a bi-merge model were adopted, creditors are not required to adopt it. Doing so could likely increase costs, reduce scoring precision, and lead to inferior credit decisions.
If all lenders did decide to go the bi-merge route, estimates suggest a hit to earnings of ~16%. While this is material, it is manageable. It does not change the fundamental dynamic that FICO’s pricing power stems from its near-universal acceptance by lenders and the deep integration of its scores into financial workflows.
Paradoxically, the confusion created by bi-merge discussions may even reinforce FICO’s value proposition: consistency, reliability, and trust from lenders.
At the end of the day, any material disruption would take years to play out, and by that time, FICO’s growing presence in analytics and decision-management tools likely help offset any revenue impact. In the near term, volatility is to be expected in a name as richly valued, but over a longer horizon, the company’s economics and market position should reassert themselves.
Thermo Fisher Scientific (TMO): A Compounder Hiding in Plain Sight
Drawdown: Down 35% from 52-week highs
Valuation: 17.5x forward P/E vs. 10-year average of ~25x
Why it’s fallen
TMO has been navigating a series of demand-related headwinds.
Inventory overhang from the post-COVID period has slowed revenue reacceleration, as customers work through stockpiled lab products before initiating new purchases. At the same time, sluggish biotech demand, while not a new development, continues to weigh on instrument and reagent sales.
These persistent pressures have been compounded by a wave of more recent challenges. The U.S.-China tariff dispute is expected to reduce sales in China by an estimated $400 million, a notable hit for a region that comprises roughly 8% of TMO’s business. Tariffs have also increased costs on lab instruments and diagnostic kits that rely on China-sourced components. Domestic pressures haven’t helped either as proposed reductions to U.S. government research budgets have added uncertainty to TMO’s academic and public-sector revenue streams.
Management acknowledged the impact of these issues by lowering its full-year outlook despite beating Q1 2025 earnings expectations. And with China’s broader economic slowdown continuing to pressure demand in that region, concerns have remained front and center.
The result? A best-in-class compounder trading near multi-year lows, down 35% from its highs in November.
Why it’s compelling
Thermo Fisher plays a critical enabling role in the global healthcare and life sciences ecosystem. Its instruments, diagnostics, lab services, and pharma offerings support drug development, clinical trials, and academic research across the world. What makes TMO particularly compelling is the breadth and depth of its competitive moat. This is driven by a recurring revenue model centered on consumables, and an intentional acquisition strategy aimed at building the scale necessary to become a true “one-stop shop” for scientific and medical research needs.
With a strong track record of integrating acquisitions, executing operationally, and generating consistent free cash flow, TMO offers both stability and optionality. Its vast portfolio and embedded relationships with pharmaceutical, biotech, and academic institutions reinforce switching costs and pricing power. Importantly, industry-wide weakness impacts all players which not only positions TMO to capture market share from competitors, but may also give it access to acquisition targets at more attractive prices.
From a valuation standpoint, shares trade at 17.5x forward earnings, well below the company’s 10-year average. For a business with this level of durability and embedded demand, the current multiple offers long-term investors a rare window into a category leader.
Likely outcome
The long-term drivers haven’t changed. Scientific research is a global priority that doesn’t get outsourced to lower-cost countries, and while drug development may experience temporary lulls, this remains a necessity. TMO’s exposure to secular healthcare tailwinds like aging populations, rising chronic disease burdens, and accelerating innovation in biotechnology and diagnostics ensures that demand ultimately resumes.
Crucially, with operations spanning the globe and a product suite that supports everything from discovery to delivery, TMO has been built to capture spending wherever it happens. In times of sector softness, that geographic and operational reach becomes even more valuable.
Final Thoughts
Each of these companies has hit a speed bump dramatically impacting each stock’s sentiment. But the fundamentals behind them remain intact. More importantly, they share three critical traits:
- Durable competitive advantages that competitors can’t easily replicate
- High returns on capital that compound wealth over time
- Clear paths to long-term earnings growth despite near-term headwinds
For investors with patience, pullbacks in names like these present opportunities to own compounding machines at fair prices; or in the case of FICO, a more fair price.
Temporary problems do not destroy permanent competitive advantages. And when the issues creating uncertainty are specific, identifiable, and tied to regulatory or temporary demand-related developments, the resulting dislocations can offer patient investors meaningful entry points. As always, watching for clarity on these outcomes will help gauge the likely duration of their impact.
Disclosure: I have a long equity position in Thermo Fisher Scientific (TMO), no position in Fair Isaac Corp (FICO), and have a short put position in UnitedHealth Group (UNH).
