UnitedHealth Group shares gained more than 12% in pre-market trading after Warren Buffett’s Berkshire Hathaway announced it had purchased 5.04 million shares (approximately $1.57 billion) in the health insurer.
The company has recently been shaken by events such as rising healthcare costs, a U.S. Department of Justice billing investigation, a cyberattack, and the murder of former senior executive Brian Thompson.
Morningstar analyst Julie Utterback said, “This purchase by a reputable investment firm, which believes market expectations are too pessimistic in the long term, is a positive signal.” UnitedHealth, the worst-performing stock on the Dow Jones Index this year, has lost approximately 46% of its value. Last month, the company announced its year-end adjusted earnings per share forecast at least $16, falling short of analyst estimates. It also underwent a CEO change, with Stephen Hemsley returning to the role. UnitedHealth shares are currently trading at 15.8 times forward earnings estimates, below the five-year average of $19. Following the news, Centene and Molina Healthcare shares also rose by more than 4%.Berkshire also announced that it acquired new shares in Nucor, Allegion and Lamar Advertising.
