Core Insights - Berkshire Hathaway has acquired a stake in UnitedHealth Group, indicating potential long-term value overlooked by retail investors [1][2] - UnitedHealth operates in two major segments: UnitedHealthcare (insurance) and Optum (services), focusing on both medical cost coverage and healthcare delivery [2][8] Financial Performance - UnitedHealth's medical care ratio reached nearly 90% in 2Q 2025, significantly higher than previous years (85.5% in 2024, 83.2% in 2023, and 82% in 2022), indicating rising healthcare costs impacting margins [3][4] - The company experienced an earnings miss and reduced full-year profit outlook, leading to a significant drop in share price and leadership changes [4][5] Recovery Potential - Margin pressure is seen as temporary, with management expecting recovery between 2026 and 2027 through premium adjustments [6][7] - The aging U.S. population is a structural tailwind for Optum, with projections showing the senior population will grow from 55 million in 2020 to about 80 million by 2040, increasing demand for Medicare Advantage plans [10][11][12] Market Context - The healthcare sector has lagged behind the S&P 500 since early 2024, presenting a potential margin of safety for investors as healthcare stocks historically revert to market performance [14] - UnitedHealth's scale and diversified business model position it favorably to absorb rising medical costs, which are increasing at around 8.5% or more [18][19]
UnitedHealth Group: Why this Beaten-Down Stock is Primed for Recovery