Buffett Is Buying What Everyone Else Is Selling (Again…)

About this video

• Video Title: Buffett Is Buying What Everyone Else Is Selling (Again…)
• Channel: Capital.com
• Speakers: Not specified
• Duration: 00:05:46

Overview

This video discusses Warren Buffett's recent $1.6 billion investment in United Health Group (UNH), a major health insurer facing scandals and a significant stock price drop. It explores the reasons behind Buffett's contrarian investment strategy, drawing parallels to his successful investment in Goldman Sachs during the 2008 crisis and his unsuccessful investment in Tesco. The video presents arguments for and against investing in UNH, highlighting its market position and valuation versus regulatory risks and potential for deep-seated issues.

Key takeaways

• Buffett's Contrarian Investment: Warren Buffett, through Berkshire Hathaway, has invested $1.6 billion in United Health Group (UNH) when the company is facing scandals and its stock price has fallen significantly. This aligns with his strategy of buying undervalued companies in distress.
• Historical Precedents: The investment is compared to Buffett's successful $5 billion investment in Goldman Sachs during the 2008 financial crisis and his problematic investment in Tesco, which resulted in a significant loss.
• Arguments for Investing in UNH: UNH is a dominant player in the healthcare industry with a strong subsidiary (Optum). Its stock is trading at a significantly lower Price-to-Earnings (PE) ratio than its historical average and competitors, suggesting potential undervaluation.
• Arguments Against Investing in UNH: UNH faces a DOJ investigation into its billing practices, potential for large fines, reputational damage from the murder of its CEO and negative press, and the ongoing challenge of rising medical costs.
• Tesco Parallel: The situation at UNH is compared to Buffett's investment in Tesco, which also faced accounting scandals and regulatory scrutiny. Buffett's delayed exit from Tesco led to substantial losses, raising concerns about a similar outcome for the UNH investment.
• Hinges on Resolution: The success of Buffett's UNH investment depends on the resolution of the DOJ investigation and UNH's ability to manage its costs and improve earnings.