Attracting Buffett, Renaissance, and Tepper to bottom-fish together! The scandal-ridden insurance giant - UnitedHealth

The market is avoiding it, but big names like Buffett are buying the dip, "betting" on UnitedHealth Group.

According to the latest 13F filing disclosed by Berkshire Hathaway, the company established a new position of 5.04 million shares in UnitedHealth Group, with a market value of approximately $1.57 billion, marking a return to the health insurance sector after fourteen years.

As previously mentioned by Wall Street Watch, renowned hedge fund manager David Tepper's Appaloosa Fund also significantly increased its holdings by 2.3 million shares of UnitedHealth in the second quarter, with a market value of $760 million, making it the fund's second-largest position after Alibaba.

According to currently available information, hedge fund giant Renaissance also increased its holdings of UnitedHealth by 1.35 million shares in the second quarter, while the fund company Dodge & Cox significantly raised its position by 4.73 million shares. Legendary investor Michael Burry and the Saudi Public Investment Fund (PIF) also purchased call options on the company.

However, before the news of Buffett and others increasing their holdings was revealed, this largest health insurance company in the U.S. was experiencing its worst year since the 2008 financial crisis: the company not only suspended its annual performance guidance and replaced its CEO but also faced a criminal investigation by the U.S. Department of Justice.

So far this year, the company's stock price has fallen nearly 45%, with a significant evaporation of market value, making it one of the worst-performing components in the S&P 500 this quarter.

At a time when many investors are fearful and avoiding it, the contrarian moves by investment giants like Buffett undoubtedly cast a crucial vote of confidence for this troubled company.

Following this news, UnitedHealth surged nearly 10% in after-hours trading.

Troubles Persist! The Health Insurance Giant Stuck in the Quagmire

As a leader in the U.S. healthcare industry, UnitedHealth has faced unprecedented challenges this year, with pervasive market concerns leading to a steep decline in the company's stock price.

Reports indicate that in May of this year, the U.S. Department of Justice launched an investigation into UnitedHealth's billing practices in the Medicare Advantage program, suspecting that it exaggerated diagnoses to obtain additional government payments.

Although the company stated in July that it was actively cooperating with the Department of Justice and was "confident" in its business operations, this potential criminal investigation has become a "Damocles' sword" hanging over the company.

In the same month, the company announced the suspension of its annual performance outlook due to "a surge in medical demand leading to a sudden change in the operating environment," while CEO Andrew Witty suddenly resigned for "personal reasons," with former CEO Stephen Hemsley taking over again In addition to regulatory pressure and changes in senior management, the continuously rising healthcare costs and the federal government's policy pressure to cut healthcare spending have also cast uncertainty over the company's future.

Since last year, UnitedHealth has also faced public opinion pressure from cyberattacks. At the end of last year, then-CEO Brian Thompson was shot, sparking widespread discussion about the healthcare system across the United States and damaging UnitedHealth's public image.

Why are the big players collectively bottom-fishing? What’s good about this company?

Despite facing multiple challenges, UnitedHealth's fundamentals remain robust.

Financial reports show that in 2024, the company achieved revenue of $400.3 billion, with net profit exceeding $14.4 billion, demonstrating strong profitability.

Some investors believe that UnitedHealth has always been a "safe and stable" dividend growth stock, continuously increasing its dividends over the past 15 years.

For example, if an investor spent $10,000 to buy the stock at the end of 2003, the value of the holding would reach $181,000 after 20 years, and even accounting for the recent sharp decline, the holding value would still be around $100,000.

Furthermore, as the stock price declines, UnitedHealth's stock price has now fallen back to 2020 levels, with a price-to-earnings ratio of only 12 times, making its valuation level significantly attractive.

Supporters also argue that as one of the largest health insurance companies in the United States, UnitedHealth Group still holds an important position in the industry, and its long-term prospects remain promising; the current difficulties are more short-term in nature