UnitedHealth Group (UNH) is soaring out of the gate Friday after regulatory filings revealed Warren Buffett's holding company, Berkshire Hathaway (BRK.B), initiated a stake in the beaten-down Dow Jones stock in the second quarter.
According to WhaleWisdom, Warren Buffett's holding company bought a little more than 5 million UNH shares between April 1 and June 30, accounting for 0.6% of the Berkshire Hathaway equity portfolio and making it the 18th-largest position.
The stake was worth a market value of $1.6 billion at the end of Q2.
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Why did Buffett buy UnitedHealth stock?
It's been a rough stretch for UnitedHealth – both on and off the price charts. The country's largest health insurer has struggled with rising Medicare costs and a Department of Justice investigation into its billing practices.
The company also announced in May that its CEO, Andrew Witty, was stepping down. And in July, it gave a full-year outlook that came in well below what Wall Street was expecting.
"When we prepared our 2025 Medicare Advantage offerings back in the first half of 2024, we significantly underestimated the accelerating medical trend and did not modify benefits or plan offerings sufficiently to offset the pressures we are now experiencing," said UnitedHealthcare CEO Tim Noel on the company's earnings call.
And its share price has plummeted as a result. In the past 12 months, UNH shares have plunged 52%. And they're down 46% for the year to date through April 14 – making UnitedHealth the worst Dow Jones stock of 2025 so far.
And this may explain why UnitedHealth was one of the stocks Buffett bought in Q2. Following its recent slump, UNH's forward price-to-earnings (P/E) ratio is now at 16.5 – below both its five-year average of 19.2, according to Morningstar, and the S&P 500's forward P/E ratio of 23.3.
And if there's one thing Warren Buffett loves, it's a bargain. Also working in UnitedHealth's favor is its fat 3.3% dividend yield, which, at the moment, is more than double the yield on the S&P 500.
Does this make UNH stock a buy?
Buffett & Co. are not the only ones on Wall Street that have signaled their confidence in the embattled blue chip stock.
Of the 26 analysts covering UnitedHealth Group who are tracked by S&P Global Market Intelligence, 13 say it's a Strong Buy, six call it a Buy, five have it at Hold and two rate it a Strong Sell. This works out to a consensus Buy recommendation.
Meanwhile, the average price target of $327.29 represents implied upside of more than 20% over the next 12 months or so. And the Street's loftiest target price on UNH of $626 is more than two times higher than the stock's current price.
Truist Securities analyst David MacDonald is one of those with a Buy rating on UNH.
"The company has several initiatives underway to drive improvement across segments," MacDonald wrote in a July 31 note, adding that he sees "opportunity around value-based care and broader margin improvement aided by further leveraging [of] automation/AI over time."
The analyst adds that "long-term execution" is key and that UnitedHealth Group's cash flow "should help drive balanced ongoing capital deployment while supporting corrective actions and investment in core capabilities and technology/efficiency."
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