Over the past few weeks, it has come to featherlight that Warren Buffett has been buying Unitedhealth (NYSE: UNH) Actions for his investment company, Berkshire Hathaway. I am not surprised by this trade – August 5, I said that Unitedhealth’s actions perfectly match the Buffett form.

Should investors consider compliance with the investment guru to health insurance? Let’s talk.

Disaster in 2025

Historically, Unitedhealth Actions were a very consistent contractor. However, this year it was an absolute dog. One of the reasons is that recently a health insurance company has significantly underestimated the demand and costs of health services in the USA. As a result, he published several main profit warnings (and the general director of Andrew Witta stepped down).

Even worse, the company was involved in several scandals. In May Wall Street Journal informed that the US Department of Justice carried out a criminal investigation in the company for a possible Medicare fraud while The Guardian He informed that the group had made secret payments for nursing homes to keep the residents outside the hospital.

This combination of problems has dropped significantly. At some point, he recently traded nearly 240 USD – about 60% below its ups.

Maneuverability

So the company is now a bit of a mess. However, I think that this should be able to reverse. The president is now Stephen Hemsley, who was the main ex of the group in 2006–2017 and supervised the period of huge growth of the company. And he is convinced that he can fix it.

Hemsley’s plan includes optimization of insurance prices, improving the company’s ability to predict future trends, repair business practices and improve the experience of consumers and suppliers. He believes that these strategies may result in a return to an boost in earnings next year.

Attractive valuation

Approaching the herd itself seems to be relatively attractive. This year, Hemsley provided guidelines for profit for the share of USD 16 (compared to guidelines up to USD 30 at the beginning of the year).

Thus, at today’s price of 300 USD, the price to profit (P/E) is around 19. This is below the American market and this is not a multiple for the insurer leading in the industry.

It is worth noting that many analysts believe that “Hemsley kitchen sank” guidelines and ensured low estimation of earnings that can be overcome. Earnings for a year can be higher than USD 16 and make the actions look cheaper.

It’s worth looking

I will indicate that here the return may take some time. So while the actions increased because it came to featherlight that Buffett bought it, there is no guarantee that it would grow in a miniature period.

After many warnings of profits, the company will have to prove that it is based on an insurance valuation. He will also have to regain the trust of institutional investors and it may not be effortless.

However, I think that it is worth considering actions today. When the industry leader trades by 50% below his ups, it is often possible to operate.