UNH Stock Analysis: Why Has UNH Stock Been Cut in Half This Year? Should Investors Follow Buffett and Keep Holding? Is Now a Good Time to Buy UNH?

TradingKey - we believe that now remains an opportune moment to purchase UNH stock. In an era where AI technology is taking flight, investors also need to acquire blue-chip stocks to hedge against risk.

What kind of company is UNH?

UnitedHealth Group (UNH) is one of America’s largest healthcare service companies. Its operations span commercial insurance, government healthcare programs (Medicare/Medicaid), medical services, and data analytics.

The company’s core competitive strength lies in the scale advantage of its insurance business and the high-growth capabilities of Optum, its healthcare services and technology platform. This creates an integrated "payer + provider" closed-loop system. For investors, UNH represents a typical defensive, strong cash flow, and stable-performing healthcare blue-chip stock within the U.S. market, making it one of the most essential holdings for long-term capital allocation in the healthcare sector.

More about UNH

Why did UNH’s stock price get cut in half this year? (What is UNH's stock performance?)

I. CEO Brian Thompson Assassinated, Internal Leadership Turmoil

On December 4, 2024, UnitedHealthcare CEO Brian Thompson was shot and killed on a Manhattan street. The suspect, Luigi Mangione, carried notes filled with phrases such as “Deny, Defend, Depose.” On the first trading day following the incident, UNH’s stock plummeted 5.2% and continued its downward trend.

Following the assassination, social media engagement surged, with the #FreeLuigi hashtag garnering over 50,000 reposts. Reddit and X were flooded with complaints about the insurance industry’s "deny culture," even briefly surpassing the attention given to the Trump assassination attempt.

Under public pressure, UNH was compelled to relax its claims denial standards. This shift is reflected in the soaring Medical Care Ratio (MCR) visible in its financial reports, which also triggered internal upheaval. On May 13, 2025, UNH CEO Andrew Witty resigned for "personal reasons," leading to the return of former CEO Stephen Hemsley.

As analyzed by Reuters, this phenomenon represents panic selling in the short term and a "chilling effect" on the industry in the long term. Such developments are unfavorable from both short- and long-term perspectives, unless they force the insurance industry to accelerate reforms and demonstrate improved financial performance.

II. Soaring Medical Care Ratio (MCR) and Eroding Profits

The core of UnitedHealth Group's (UNH) 2025 challenges centers on its Medical Care Ratio (MCR), a critical metric representing the percentage of premiums spent on medical claims relative to profit. For health insurers like UnitedHealth Group, a rising MCR indicates shrinking profit margins and operational inefficiencies.

【Acknowledgement of Medicaid funding cuts impacting results, Source:UNH Q2 Earnings Report】

In the second quarter of 2025, UNH reported that its MCR surged to unsustainable levels. This was attributed to increased medical utilization, as patients sought more services after the pandemic-induced backlog, alongside reimbursement pressures from federal Medicare funding cuts.

【UNH Stock Price Chart, Source:TradingView】

Consequently, the company's earnings fell significantly below expectations. The full-year adjusted earnings per share (EPS) forecast was sharply revised downwards from $29.50-$30.00 to just $16.25, immediately triggering a massive sell-off by investors. On that day, the stock experienced its largest single-day drop in UNH’s history, falling by 22.38%.

III. U.S. Department of Justice Launches Criminal Investigation into UNH

On February 21, 2025, The Wall Street Journal reported that the U.S. Department of Justice initiated an investigation into UnitedHealth Group’s Medicare billing practices, causing the stock to plunge 7.17% that day.

【Source: WSJ】

On May 13, 2025, the WSJ further revealed that UnitedHealth Group allegedly exploited Medicare billing rules for profit, purportedly by exaggerating patient conditions to defraud the federal government of billions in excess reimbursements annually. This revelation led to another sharp decline of nearly 18% in the stock price.

Initially, UNH denied "lack of knowledge," but in an SEC filing on July 24, 2025, it formally acknowledged cooperating with criminal and civil requests. The company committed to funding a third-party audit of its risk adjustment coding, pharmacy services, and physician reimbursements, causing another nearly 5% drop in share price that day.

To date, no media outlets have publicly reported the conclusion of the U.S. Department of Justice’s investigation into UNH, creating significant uncertainty for UNH investors.

IV. Trump’s "One Big Beautiful Bill"

Trump’s "One Big Beautiful Bill" introduced significant policy headwinds for UNH’s stock price. The bill slashed approximately $1 trillion from Medicaid (a public health insurance program providing care to low-income residents) and ACA subsidies (premium subsidies designed to help low- and middle-income families purchase health insurance). The Congressional Budget Office (CBO) projected that up to 12 million low-income individuals could lose health insurance coverage—a direct blow to UNH, whose foundational business relies on Medicaid.

【Acknowledgement of Medicaid funding cuts impacting results, Source:UNH Q2 Earnings Report】

During the Q2 2025 earnings call, UNH management explicitly voiced concerns over administrative burdens and cost pressures, which significantly impacted the company’s operations in the short term.

Why did Warren Buffett choose to hold UNH?

Berkshire Hathaway's 13F filing for the second quarter of 2025 revealed that Warren Buffett initiated a position of 5.039 million shares in UnitedHealth Group, an American healthcare insurer, at an average cost of $314 per share, totaling approximately $1.6 billion.

The news sent UNH's stock price soaring 12% in a single day. Investors, however, were more interested in why Buffett chose to hold a company currently under investigation with deteriorating profitability.

We offer three key reasons:

I. UNH Possesses High Barriers to Entry

Unlike conventional insurance companies, UNH boasts a comprehensive ecosystem. This capacity for "end-to-end internal profit capture" means its true economic return significantly exceeds what its surface financial reports indicate.

Drawing parallels with Buffett’s investments in Coca-Cola and Apple, UNH aligns with his rationale for investing in companies with strong moats.

Buffett favors investing in "unreplicable" companies, and UNH’s sheer scale and data footprint have grown so vast that any comparable company would struggle to catch up.

II. UNH Stock Price Has Fallen to a High Margin of Safety Zone

Its current valuation offers a substantial "margin of safety." In 2025, UNH’s stock price dropped to around $300, pushing its price-to-earnings (P/E) ratio down to 17 times. This is significantly below its ten-year average P/E of 22 times and well below the S&P 500’s 30.8 times.

【UNH Stock Price Candlestick Chart, Source: TradingKey】

Buffett has repeatedly emphasized that his stock purchases are fundamentally about "buying the discounted value of future cash flows." At its current market capitalization, UNH’s free cash flow yield has entered what Buffett calls the most comfortable "cheap enough to sleep well" range.

Meanwhile, the proportion of Optum’s high-margin business continues to grow rapidly, effectively offsetting volatility on the insurance side with increasing certainty.

III. Buffett’s Long-Term Value Investing Conviction

Buffett adheres to long-term value investing, believing that time will smooth out all short-term noise. Regulatory investigations, policy changes, and rising healthcare costs are, in his view, "temporary headwinds." Conversely, UNH's underlying logic—America's aging population, inelastic growth in healthcare spending, and persistent government outsourcing—represents trends certain to continue for decades. As the market leader in the U.S., UNH naturally captures the largest share of this growth dividend.

UNH’s business model reassures him that with patient holding, time will transform current "problems" into future "compounding returns." In other words, Buffett believes UNH is a company whose "foundations cannot be shaken, no matter how big the problems."

Is now a good time to buy UNH?

First, we believe that now remains an opportune moment to purchase UNH stock. In an era where AI technology is taking flight, investors also need to acquire blue-chip stocks to hedge against risk.

UNH continues to be an optimal choice for investors. We share Buffett's investment philosophy: UNH’s model currently has no peer that can replicate its position in the short term. With UNH's P/E ratio having fallen into a safe and effective investment zone, we maintain that UNH holds significant long-term investment value, though this requires patience and a long-term perspective.