Warren Buffett has struck again – this time in healthcare’s rubble.
Berkshire Hathaway (NYSE: BRK.B) recently disclosed a five million share position in United Healthcare Group (NYSE: UNH), the nation’s largest health insurer.
The timing is quintessentially Buffett.
UNH shares have plummeted more than 50% from their all-time highs, battered by regulatory pressures and industry headwinds.
While most investors flee the carnage, the Oracle of Omaha is doing what he does best – hunting for value in the wreckage.
But as with everything Buffett does, context matters.
Putting Things in Perspective
The United Healthcare position is estimated to be worth around US$1.6 billion based on Berkshire’s five million share purchase.
That’s a sizable sum of money by any measure.
Here’s what you need to know: Berkshire Hathaway’s stock portfolio is worth close to US$295 billion. Therefore, the UNH position is less than 0.6% of the company’s overall stock holdings.
In contrast, Berkshire’s largest position is actually Apple (NASDAQ: AAPL), valued at US$65 billion – representing more than a fifth of the total stock portfolio.
Put simply, while the United Healthcare investment grabbed headlines, it wouldn’t be moving Berkshire’s needle anytime soon.
Beyond that, there’s a crucial question: did Buffett actually make this call?
The Real Decision Makers
Every Berkshire Hathaway stock purchase gets dissected as if it came straight from Warren Buffett himself.
But the Oracle doesn’t fly solo anymore.
Berkshire brought on Todd Combs in 2010, followed by Ted Weschler in 2012. Both serve as investment managers with significant autonomy.
Initially, Buffett allocated US$2 billion to each manager.
By 2017, that figure had quintrupled to US$10 billion per person.
Given this structure, the US$1.6 billion UNH bet could be from either Combs or Weschler – not Buffett himself.
Get Smart: Look before you leap
Context matters when it comes to investing.
If you jump in and buy shares without understanding the full picture, you could get hurt in the process.
For Berkshire, even if the UnitedHealth investment doesn’t work out, you won’t see the company sweating over a position worth less than 0.6%.
Does the same apply to you?
That’s food for thought if you decide to pull the trigger.
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Disclosure: Chin Hui Leong owns shares of Apple and Berkshire Hathaway
