Buffett is WRONG… He Makes a bad Bet in a Beaten-Down Company

Last week, the markets were buzzing.

Investors were anticipating some major news.

Inflation numbers came in, but inflation wasn’t what everyone was excited about.

The big news was about Warren Buffett.

Buffett’s company, Berkshire Hathaway (ticker: BRK.A / BRK.B), bought up to $5 billion worth of a company.

And nobody knew which company it was.

Here’s an article from Newsweek discussing the hype.

Everyone was on the edge of their seats, and there was tons of speculation about the secret company.

Most people thought it was shipping companies, FedEx (ticker: FDX) or UPS (ticker: UPS).

And possibly even Alphabet (ticker: GOOGL), a company Buffett has said he regrets not purchasing earlier.

But people were shocked to learn the stock Buffett purchased was UnitedHealth Group (ticker: UNH).

UnitedHealth is the largest health insurance provider in the United States, insuring almost 30 million Americans.

UnitedHealth’s stock price has been abysmal in 2025.

Earlier in August, the stock price was down more than 50%.

But UnitedHealth has rebounded over 20% since the early August lows.

And the news about Buffett’s stake has helped enormously.

At one point on Friday, UnitedHealth was up over 14%.

Should we follow Buffett and buy some UnitedHealth?

UnitedHealth has an excellent Return on Equity (ROE) of 23%, one of the highest among health insurers.

The price-to-earnings ratio is currently near 13x, which is much lower than UnitedHealth’s historical average.

And the price-to-earnings ratio is low even after the run-up in price so far in August.

However, UnitedHealth is in BIG trouble.

Its debt/equity ratio of 0.84 is one of the highest among health insurers, and continues to rise.

And UnitedHealth’s profit margin was only 3.6% in 2024, a steep drop from prior years.

But the biggest problem is from the government.

The Department of Justice (DOJ) is currently investigating UnitedHealth over Medicare fraud.

When I search for a stock and the word “investigation,” I like to see zero hits.

I have no idea what will come from the DOJ investigation.

But the Trump administration is incredibly interested in any form of government fraud, probably more so than prior administrations.

Buffett is going to regret his investment in UnitedHealth.

UnitedHealth has too much debt, and its profitability is shrinking.

And while the price-to-earnings ratio looks good, it’s mostly because the price is falling due to the DOJ investigation.

Going against Buffett seems crazy.

He’s certainly earned his “Oracle of Omaha” nickname from his amazing investing track record.

But Buffett isn’t perfect.

Buffett lost a ton of money in Paramount when he decided to sell in 2024.

And Buffett owns around 325 million shares of Kraft Heinz (ticker: KHC), which is down 70% from its highs in 2017.

Normally, when Buffett says jump, I ask, “how high?”

But I recommend sitting out on UnitedHealth.

What Buffett picks do you currently own?