UnitedHealth stock got a much-needed boost after Warren Buffett’s Berkshire Hathaway disclosed it had loaded up on the health conglomerate’s battered shares.
The stock closed up nearly 12% to $304 on Friday after Berkshire Hathaway revealed it had bought just over five million shares of UnitedHealth worth about $1.6 billion. That would represent the largest percentage increase for shares since Nov. 4, 2020, when they rose 10.3%, according to Dow Jones Market Data.
Through Thursday’s close, the stock had more than halved in value over the past 12 months amid a series of sharp selloffs. It’s easy to see why it looks attractive to Buffett—a well-known value investor who likes to snap up stocks trading at a low valuation and keep them for a long time.
Yet, the troubles facing the company haven’t gone anywhere.
UnitedHealth is the parent of health insurer UnitedHealthcare. It also runs a health services business that includes pharmacy benefit manager Optum Rx, as well as a software arm that touches a meaningful proportion of U.S. patient records.
UnitedHealth isn’t the only healthcare stock that has struggled recently. Much of the sector is suffering from skyrocketing reimbursement costs, although its insurance division seems to have been hit particularly hard.
The company has also become the poster child for Americans’ frustrations about the health insurance industry following the murder of UnitedHealthcare executive Brian Thompson in December last year.
Scrutiny over its Medicare practices has investors worried as well. UnitedHealth said in July it was “complying with formal criminal and civil requests” from the Department of Justice” following a Wall Street Journal report that the company was under investigation for possible criminal Medicare fraud.
Adding to the pain is political pressure by the Trump administration as well as Big Pharma to “take out the middlemen.” That means the pharmacy-benefit managers such as UnitedHealth’s Optum Rx.
Even as UnitedHealth acknowledged “serious challenges” in its latest earnings call last month, it projected a “return to earnings growth” in 2026, without offering much detail.
Although Buffett seems to think the value of UNH shares of some 15 times forward earnings is about right, that doesn’t mean investors should ignore the long list of unresolved issues facing the company.