The share price of beleaguered U.S health insurer UnitedHealth was up 7% in overnight trading after Warren Buffett’s Berkshire Hathaway revealed it had taken a significant stake in the stock.
It’s understood that the Omaha-based conglomerate bought more than 5 million shares in the health care firm for around US$1.6 billion at the end of June, making it the 18th biggest position in the Berkshire $300 billion equity portfolio behind Amazon and Constellation Brands.
Down around 50% for 2025 prior to yesterday’s close, UnitedHealth - the largest private health insurer – remains among the 10 worst-performing S&P 500 stocks this year.
A one-time healthcare stalwart, UnitedHealth had become a punching bag for public disapproval against spiralling health care costs and is currently facing a Justice Department investigation into its Medicare billing practices.
Buffett is no stranger to UnitedHealth, with Berkshire having owned around 1.18 million shares in the health insurer between 2006 and 2009, before selling his entire stake in 2010 amid a broader retreat from health insurers.
In recent times, UnitedHealth has been in the limelight for all the wrong reasons.
In addition to facing soaring medical costs and federal investigations, UnitedHealth has also had to deal with the fallout of the killing of a top executive and a cyberattack last year.
This year hasn’t been any kinder to UnitedHealth, with the company falling foul of Wall Street after a new 2025 outlook - well short of estimates – flagged prolonged pain with a new, far lower profit forecast as it sees billions of additional costs in the upcoming quarters.
The decision to pull its annual earnings outlook in May was followed by the exit of CEO Andrew Witty saw the stock share price fall even further.
As a result, chairman Stephen Hemsley has returned to his former role as CEO to help engineer a turnaround.
UnitedHealth’s shares have lost more than half their value in the past year.
“Yes, the headlines are scary, but there may be brighter days ahead,” said Darren Pollock, portfolio manager at Cheviot Value Management, which owns shares of Berkshire.
Buffett (95), who is stepping down as Berkshire CEO at the end of the year, has become the world's most successful investor through a value investing strategy that involves picking undervalued stocks by measuring price-to-book, price-to-earnings, and free cash flow.
He has been critical of the healthcare system in the U.S., calling it a “tapeworm” on the economy due to its high costs.
As a result, shares of the insurer are trading at a price-earnings ratio of just under 12 - near its lowest in more than a decade – and this may have been one of many reasons that attracted Berkshire to buy the stock.
Berkshire also revealed it has bought the common stocks of security products provider Allegion, home builder DR Horton, outdoor advertiser Lamar Advertising and steelmaker Nucor, and significantly increased its stake in homebuilder Lennar.
Berkshire sold 20 million shares of Apple for around $4 billion during the second quarter and now owns 280 million shares worth $65 billion. It also sold 26 million shares of Bank of America, continuing to reduce its holding in the big bank.
Berkshire’s largest positions as of the end of the second quarter were Apple, American Express, Bank of America, Coca-Cola and Chevron.
