Buffett strikes again
Warren Buffett is making headlines again, and this time he’s creating a buzz in the healthcare arena. UnitedHealth Group (UNH) stock rallied more than 12% in premarket trade on Friday following Berkshire Hathaway’s revelation of a new stake in the health insurance giant. Berkshire now owns 5.04 million shares of UnitedHealth worth approximately $1.57 billion as of June 30, according to a filing with the U.S. Securities and Exchange Commission.
It’s classic Buffett: buying when others are selling, seeing opportunity where others see danger. And in this case, the timing couldn’t be more dramatic.
A wild ride for UnitedHealth
It has been a rough ride for UnitedHealth this year. The stock has been pummeled by a series of ills that range from runaway healthcare costs, a Department of Justice probe into its billing practices, a cyber attack, and even the gruesome murder of former executive Brian Thompson in December. Ouch.
No surprise that shares have been on a roller coaster. Indeed, UnitedHealth is still the worst-performing blue-chip stock in the Dow Jones Industrial Average this year, off almost 46%.
Why Buffett may be smiling
However, not everyone thinks the sky is falling. “While UnitedHealth still has high uncertainty, it is nice to see that this highly regarded investment firm also believes the market is pricing in assumptions that are too negative for the long term,” Morningstar analyst Julie Utterback said. Her sentiments echo what investors are murmuring these days: Buffett is seeing opportunity where others see peril.
It’s a vote of confidence in a company that’s had its fair share of ups and downs, and it’s sending a clear message: the long-term prognosis might be better than the headlines would suggest.
Leadership shake-up and earnings misses
Some of the uncertainty is coming from within the company. UnitedHealth projected full-year adjusted earnings per share of at least $16 last month—well below analysts’ already lowered expectations. Second-quarter profit also missed Wall Street expectations.
Fueling the drama, CEO Andrew Witty suddenly left in May as operating and financial pressures intensified. The reins were handed back to Stephen Hemsley, who’d led the company from 2006 until 2017. An old hand in a time of crisis—sometimes that’s exactly what a company needs.
Valuation and market reaction
Despite the setbacks, UnitedHealth is trading at around 15.8 times its forward earnings estimate, below its five-year average of 19. The premarket surge had taken shares up 12.6% to $305.8, offering much-needed relief to investors.
Rivals in health insurers also caught the ripple effect. Both Centene and Molina Healthcare gained more than 4%, suggesting that investor interest in the space is turning contagious.
Berkshire’s other moves
Buffett wasn’t just busy with healthcare. Berkshire Hathaway also disclosed new stakes in steelmaker Nucor, security products manufacturer Allegion, and outdoor advertiser Lamar Advertising. Nucor stock climbed 5.8% on the news, showing that a Buffett mention can still move markets.
What this means for investors
The moral of the story? Even during a chaotic market, iconic investors such as Buffett are able to find opportunity where others find obstacles. UnitedHealth’s problems are not imagined, but Buffett’s stake serves as a reminder to investors that sometimes the right time to purchase is when fear is running highest.
As the healthcare sector rebalances, the world will be waiting to see whether this surge is a turning point—or just a blip. Either way, it’s a reminder that in investing, timing, conviction, and a dash of Buffett magic can make all the difference.
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