Berkshire Hathaway Invests in UnitedHealth Group, Boosting Stock Price

UnitedHealth Group (UNH) stock surged 13.06% after Berkshire Hathaway acquired 5 million shares, valuing at $1.6 billion. Despite a disappointing quarter, escalating medical costs, and a CEO resignation, the stock may be undervalued with a PE ratio of 13.3 and a GF Value of $638.72. The company has consistently grown revenue at 12.7% over three years and has healthy cash flow growth.

UnitedHealth Group (UNH) stock surged 13.06% after Berkshire Hathaway acquired 5 million shares, valuing the investment at $1.6 billion. Despite a disappointing quarter, escalating medical costs, and a CEO resignation, the stock may be undervalued with a PE ratio of 13.3 and a GF Value of $638.72. The company has consistently grown revenue at 12.7% over three years and has healthy cash flow growth.

Warren Buffett’s Berkshire Hathaway has taken a near $1.6 billion stake in UnitedHealth Group [1]. This significant investment came amidst a challenging period for the healthcare giant, which has seen a 46% stock price decline, federal investigations into Medicare billing, a massive cyberattack, and leadership upheaval. However, Buffett's move signals a calculated bet on the healthcare sector's resilience and UnitedHealth's long-term structural advantages.

UnitedHealth Group reported its second-quarter 2025 earnings, with revenue of $111.6 billion, a 13% increase from the previous year. However, net income decreased by 19% to $3.41 billion, and EPS fell by 11% to $3.76. The company's profit margin contracted to 3.1%, driven by higher expenses [4]. Despite these setbacks, UnitedHealth's Optum division, which generates significant cash flows, remains a key driver of growth.

The investment by Berkshire Hathaway reflects a broader shift in the company's portfolio. Berkshire trimmed its Apple stake by 7% and added positions in steel and homebuilders, signaling a pivot toward sectors with inelastic demand and predictable cash flows. UnitedHealth, with its high-margin healthcare services and digital infrastructure, fits this mold [3].

Investors should remain cautious despite the stock's recent surge. UnitedHealth faces real regulatory risks and operational challenges. The stock's 11% premarket surge following the investment announcement was a psychological boost, but long-term success will depend on the company's ability to resolve its Medicare billing investigations and cybersecurity vulnerabilities [3].

UnitedHealth's resilience in the post-pandemic healthcare sector, driven by AI-driven HST growth and specialty pharmacy expansion, highlights its competitive moat. The company's ability to integrate AI into care delivery and manage rising drug costs under Medicare Part D underscores its competitive advantage [3].

References:
[1] https://www.investmentweek.co.uk/news/4517757/unitedhealth-group-shares-surge-buffetts-berkshire-hathaway-takes-usd16bn-bet
[2] https://www.gurufocus.com/stock/FRA:UNH/summary?mobile
[3] https://www.ainvest.com/news/warren-buffett-berkshire-hathaway-invests-unitedhealth-group-strategic-move-long-term-implications-2508/
[4] https://simplywall.st/stocks/us/healthcare/nyse-unh/unitedhealth-group/news/unitedhealth-group-second-quarter-2025-earnings-eps-misses-e-1