Prominent Billionaires and Hedge Funds on Wall Street Believe They've Discovered an Unbalanced Investment Opportunity
In the second quarter of 2025, a notable shift in the investment landscape emerged as several high-profile investors, including Michael Burry, Warren Buffett, David Tepper, and others, acquired significant stakes in UnitedHealth Group.
Burry, known for his prescient call on the 2008 housing market crash, purchased 20,000 shares of UnitedHealth Group, valued at around $6.239 million, representing 1.08% of his portfolio. This move came alongside Berkshire Hathaway's position worth over $1.5 billion in UnitedHealth Group.
UnitedHealth Group, the largest health insurer in the U.S., trades at about 19 times forward earnings estimates, a figure below the average seen over the last two and a half years. The company's dividend yield stands at approximately 2.9%, offering an attractive return for investors.
However, UnitedHealth Group is not without its challenges. The U.S. Department of Justice (DOJ) is investigating the company in a potential criminal matter for its Medicare Advantage billing practices. Additionally, the company faces rising medical costs, and its expected earnings for the year are significantly lower than normal, at least since 2022.
Despite these challenges, these investors view UnitedHealth Group as an asymmetric opportunity with potential upside far exceeding potential downside. For instance, Scion Asset Management, run by Michael Burry, not only bought $12 million of UnitedHealth Group's stock but also 350,000 long call options, indicating optimism about the stock price rising.
Other notable investors, such as Appaloosa Management's David Tepper, increased his stake in UnitedHealth Group by 1,300%, while Renaissance Technologies bought roughly 1.35 million shares and Lone Pine Capital purchased over 1.69 million shares.
The risk-reward proposition on UnitedHealth Group's stock is favourable, given its balance sheet strength, position at the top of the insurance market, and the intense sell-off the stock has experienced this year. However, it's important for investors to do their own due diligence, as SEC filings may not always show the true nature of an investor's position.
UnitedHealth Group's expected adjusted EPS for the year is $16, down from $27.66 last year. Despite the lower earnings, the company's solid financial footing and the optimism shown by these prominent investors suggest that UnitedHealth Group could be a compelling investment opportunity for those willing to carefully consider the risks and rewards.
