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UnitedHealth’s regulatory check-up got upgraded to a full physical, and – to Warren Buffett’s dismay – the stock came down with a cold.
What does this mean?
This year alone, UnitedHealth lost its CEO, broke a decade-long streak of beating earnings, and became the target of investigations by the Department of Justice (DoJ) and the Federal Trade Commission. No wonder its shares were down 40% even before the latest news.
Then, this week, reports spread that the DoJ will expand its scope to examine UnitedHealth’s pharmacy arm and doctor payment practices. The firm, for its part, has implemented a “public responsibility committee” to try and repair its reputation. But it’ll take more than good PR to appease investors: they pushed the stock down another 1.5%, wiping off $4 billion in market value.
Even if UnitedHealth isn’t officially charged, these regulatory probes can scare investors off. For good reason: prolonged uncertainty is the last thing you want in your portfolio – and these sort of investigations can drag on for years.
⚠️ Bear in mind, this won’t just affect UnitedHealth. The firm – worth $270 billion – is one of America’s three biggest medical middlemen. And together, the trio influence prescription drug prices across the country. So if UnitedHealth is shaken up, then insurers, hospitals, and drugmakers could be thrown off-center, too.
Zooming out: It’s a bargain… or a bust.
Some seriously big names are doubting that UnitedHealth’s headaches will last (and not just because the firm has unlimited ibuprofen access.) Legendary investors Warren Buffett, Michael Burry, and David Tepper have all bought into the stock this year. That’s big: the three aren’t known for sharing the same, uh, shares. But they all seem to believe that investors have been too harsh, leaving UnitedHealth’s stock cheaper than it should be.
