Buffett's big bet

The Oracle of Omaha couldn’t depart for retirement without dropping one last piece of game-changing investment news: At the end of June, Berkshire Hathaway purchased 5 million shares of the beleaguered health insurance giant UnitedHealth for $1.6 billion.

To say UnitedHealth has had a rough year would be an understatement. The firm has become synonymous with the failings of the American healthcare system after UnitedHealthCare CEO Brian Thompson was killed in December, sparking a widespread backlash against its insurance practices. In May, CEO Andrew Witty resigned suddenly as the company pulled its 2025 outlook.

On top of all that, the company is being investigated by the Department of Justice over billing practices. Overall, shares were down roughly 50% this year before today’s news.

But the announcement that Warren Buffett saw promise in the company sent shares 11.84% higher this afternoon—making it the stock’s best day since 2008.

Buffett, whose legacy is cemented as a classic value investor, is looking at that 50% decline as a huge markdown on a company that’s fundamentally financially sound, despite the chaos of the past year. UnitedHealth shares are trading at a P/E ratio of just under 12, its lowest in more than a decade.

Buffett’s wishlist: Berkshire also disclosed a stake in steel company Nucor, ad firm Lamar Advertising, security company Allegion, and home builders Lennar and DR Horton. And just so we’re clear, Buffett’s number twos, Todd Combs and Ted Weschler, likely also made these investment decisions, given they also have influence over Berkshire’s portfolio.

The end of an era

Today’s news wasn’t just momentous because of the positions Berkshire Hathaway disclosed, but also because Buffett is stepping down at the end of this year.

Buffett has had a legendary run at Berkshire Hathaway by taking a long-term investment approach, focusing on quality businesses with good fundamentals at reasonable prices. He also garnered a reputation as committed to aboveboard, ethical business practices. Some of his most lucrative picks have been Apple, American Express, Coca-Cola, and Bank of America.

But Berkshire Hathaway’s success rate isn’t 100%. For example, the company sold out of its positions in Wells Fargo and JP Morgan between 2019 and 2022—and since then, shares of the two companies have doubled. More recently, Berkshire purchased a $266 million stake in Ulta Beauty in Q2, before selling off the vast majority of it the very next quarter. This year, Ulta has soared 19.79%.

Shares of Berkshire Hathaway have declined roughly 7% since Buffett announced his retirement in May.

The bottom line: If you’re Greg Abel, you’ve still got a tough act to follow.—LB