In late 2025, amidst a tumultuous period for health insurers marked by escalating medical expenses and regulatory pressures, financial expert Michael Burry, famously depicted in 'The Big Short,' executed a distinctive investment strategy. Recognizing the challenging landscape, Burry divested his substantial holdings in UnitedHealth Group Inc. (UNH) and made a significant pivot, channeling his investments into Molina Healthcare, Inc. (MOH). This move underscores Burry's consistent inclination towards contrarian plays, aiming to capitalize on opportunities often overlooked by mainstream investors.
The health insurance sector experienced considerable turbulence, particularly following the Centers for Medicare & Medicaid Services' (CMS) unexpectedly low Medicare rate proposal for 2027. This regulatory shift sent ripples across the market, leading to notable declines in major health insurance stocks. For instance, Molina shares saw an 8% dip, UnitedHealth Group plummeted by 19%, and Humana Inc. (HUM) recorded a 21% decrease. Despite the general downturn, Burry's strategic shift to Molina Healthcare positioned his portfolio differently compared to those heavily invested in Medicare-centric companies.
Burry's investment rationale hinged on Molina's unique operational model. He frequently highlighted that roughly 75% of Molina's revenue originates from Medicaid, rather than Medicare. This critical distinction, he argued, provides Molina with a significant buffer against the regulatory and financial challenges impacting the broader health insurance market. Even as some competitors struggled with profitability on similar contracts, Molina's disciplined management and prudent accounting practices enabled it to sustain profitability within its specialized niche.
Further elaborating on his thesis, Burry proclaimed Molina a "generational buy" in various discussions, even drawing parallels to Warren Buffett's foundational investment in Geico. He suggested that Molina possesses a clearer trajectory for long-term expansion than even some technology giants, viewing it as an attractive acquisition prospect. His foresight in exiting UnitedHealth prior to its substantial drop and the subsequent "Burry Bump" in Molina's stock price, which saw a 13% increase in early January, further validated his unconventional approach.
The initial signs for 2026 suggest that Burry's bold move into Molina Healthcare may indeed prove to be prescient. Despite a slight dip on a recent challenging day for insurers, Molina's performance was markedly better than that of its counterparts, including UnitedHealth, CVS Health Corp. (CVS), and Humana. This early indication reinforces the potential sagacity of Burry's contrarian investment, highlighting his ability to identify value where others perceive risk.