(Reuters) -Shares of UnitedHealth Group surged more than 12% in premarket trading on Friday after Warren Buffett's Berkshire Hathaway revealed a new investment in the health insurer.
Berkshire owned 5.04 million UnitedHealth shares worth about $1.57 billion as of June 30, it said in a U.S. Securities and Exchange Commission filing.
The investment comes as the company's shares have been battered by rising health care costs, a U.S. Department of Justice probe into its billing practices, a cyberattack and the murder of former top executive Brian Thompson in December.
“While UnitedHealth still faces elevated uncertainty, it is good to see that this renowned investment firm also believes the market is discounting assumptions that are too pessimistic for the long term, which is similar to our view,” said Morningstar analyst Julie Utterback.
As of last close, the stock remains the worst performer on the blue-chip Dow Jones Industrial Average so far this year, sliding nearly 46%.
Last month, the company projected full-year adjusted earnings per share of at least $16, well short of analysts' already lowered estimates, while second-quarter profit also missed Wall Street expectations.
In May, CEO Andrew Witt abruptly stepped down amid rising operational and financial pressures, with Stephen Hemsley, who had run the company from 2006 to 2017, taking over.
UnitedHealth's shares currently trade at about 15.8 times the company's forward earnings estimates, below their five-year average of 19.
Shares were last up 12.6% at $305.8 in premarket trading. Rivals Centene and Molina Healthcare also climbed more than 4% each.
Berkshire also disclosed new stakes in steel maker Nucor, security products provider Allegion and outdoor advertiser Lamar Advertising. Nucor jumped 5.8% to $152.8.
(Reporting by Shashwat Chauhan and Mariam Sunny in Bengaluru; Editing by Rashmi Aich)
