The stock market’s mostly capable of recognising companies with unique strengths. But there are ways to find exceptions.

Crisis? What crisis?

One of the best times to buy stocks is when there’s a crisis. This doesn’t have to be across the entire market – a specific sector will do. When an industry’s under pressure, share prices often fall across the board. But the effect isn’t the same on every business. 

Companies with the best balance sheets and the lowest unit costs fare better. In other words, the strong get stronger.

That’s not to say their share prices don’t go down – they do. But the net result is much less and much weaker competition. This is where I look for opportunities to buy quality shares at bargain prices. It can be risky, but I think it’s the best and easiest way.

That easy?

It sounds straightforward – look for chances to be greedy when others are fearful. But it’s not always as simple as it sounds. The tricky bit is that it’s hard to tell how long a cyclical downturn will last. And sometimes, they even look permanent.

That means buying stocks in these situations often involves people telling you you’re making a mistake. And that can be tough. There’s often a fine line between finding a bargain and making a mistake. But some situations are easier to assess than others.

Industries that are prone to ups and downs can be good places to look. Cyclical downturns can present opportunities to buy shares in outstanding businesses.

A quality company

In this spirit, one stock I’m buying is Molina Healthcare (NYSE:MOH). It’s a US Medicaid provider that’s down 66% from its highs.

Providers collect a fixed fee for arranging medical care for low-income individuals. And they have to spend 85% of that on treatments. This leaves 15% to cover expenses. But that means having lower operating costs is a huge advantage – and that’s what Molina has.

The firm’s focused model and centralised systems help keep costs down. And this is difficult for more diversified competitors to duplicate.

This is especially important when the industry’s under pressure, as it is right now. That’s why I see the discounted share price as a buying opportunity.

A buying opportunity?

Since Covid, a number of relatively inexpensive members have left the Medicaid scheme. That’s caused costs to rise for providers. In this situation, companies lose money across the board. But the ones with higher operating costs and weaker margins lose more.

Importantly though, Medicaid rates have to improve. They’re required to be actuarily sound and give providers a chance to make money. Investors are wary because they don’t know when this will happen. It may take time and Molina recently lowered its 2026 forecast.

This however, is just the kind of situation I like. I think it’s a high-quality company that’s trading at a discount and is worth a look. 

The bottom line

A lot of investors think that cyclical companies are inevitably low-quality investments. In my view, that’s a huge mistake. Even in these industries, there are businesses with durable strengths. And the ups and downs lead to natural buying opportunities.

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As well as Michael Burry, recent data shows that Bill Nygren and Seth Klarman – two highly-respected value investors – were buying the stock in Q4 2025. So what’s the deal here?

Healthcare

Molina is a US healthcare provider focused on Medicaid – the scheme that primarily covers low-income individuals. And some recent challenges has made the stock look cheap recently.

Unfortunately, anyone who bought shares in Q4 2025 saw their investment crash 30% in a day when the company released its earnings earlier this month. And it’s not that hard to see why.

Analysts were expecting earnings per share of $0.43, but the firm posted a loss of $2.75. There were a few reasons for this, but the biggest was a reclassification of the status of its members. 

That left Molina with a more expensive cohort to look after. Costs associated with entering new markets and retroactive adjustments were also issues, but the big one was the reclassification.

Challenges

The way Medicaid works is that companies like Molina receive a fixed premium from states for the members they cover. And they have to use at least 85% of these to provide care (or pay it back).

The rest is used for a combination of operating expenses and – ideally – profits. But in 2025, costs were generally higher than premiums, meaning insurers across the board made losses. 

In theory, this should resolve itself within a year or so as premiums re-rate to reflect higher costs. Nonetheless, the prospect of rising costs is a key risk for a company that doesn’t set its own prices.

The business is probably in for a tough year in 2026. But beyond this, I think the outlook is much brighter and I suspect this is what some of the big value investors are seeing as well.

Long-term advantage

In an industry where prices are fixed, the best advantage a company can have is lower costs. And Molina leads the industry in managing its operating expenses.

A key part of this is the firm’s aggressive migration of new members to a single digital platform. This makes things simpler and reduces the need for IT staff to manage multiple different systems.

Another advantage is that the company’s main focus is Medicaid – a scheme administered by individual states. Since enrolment is usually automatic, advertising costs are minimal. 

That’s why the firm consistently has lower operating costs than the likes of Centene, Elevance, and UnitedHealth. And the important thing is that this will still be the case when pricing improves.

Buy?

I don’t think there’s much reason to expect Molina Healthcare’s share price to explode in 2026. But investing is about more than what’s going to happen in the next 10 months. 

Value investors looking with any sort of long-term outlook might well be interested in the stock. The business has a durable competitive advantage in an extremely important industry.

I think that’s an extremely attractive combination, so I’ve been buying the stock for my portfolio. And anyone looking for opportunities in the S&P 500 might well want to consider doing the same.

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Chances to get a better deal than the Oracle of Omaha don’t come around very often. So should investors seize the opportunity and buy shares?

UnitedHealth

UnitedHealth has been through a lot recently. This includes the almost unimaginable event of the company’s CEO being shot on the way to an investor meeting.

Other challenges have included rising medical costs, which haven’t been offset by higher premiums. And the firm is also being investigated in a couple of different ways. 

One focuses on the way the firm classifies its patients. The concern is that it might be exploiting the system to attract higher revenues by aggressively treating patients as more sick than they might be.

Another is concerned with the relationship between the company’s insurance arm and its provision unit. There’s a potential issue of charging competing insurers higher prices.

UnitedHealth’s Q4 earnings were strong as its vertical integration helped limit the effect of higher care costs. But while this helps with the firm’s resilience, there’s a lot of uncertainty.

I think this means investors need to be honest with themselves. It’s one thing for Buffett – an insurance specialist – to see a potential opportunity, but not everyone has this level of insight.

Molina

Molina Healthcare (NYSE:MOH) is another US healthcare provider. Michael Burry might be bullish on the Medicaid specialist, but the share price crashed 33% in response to the firm’s Q4 earnings.

It’s easy to see why – the firm faced a number of challenges. Medical costs increased and changes to the classification system also caused them to receive less money for patients needing more care.

On top of this, there were one-off adjustments and setup costs that dragged earnings down even further. And the company doesn’t expect things to improve until 2027. 

Setting rates is out of Molina’s hands and that means there’s always risk. Importantly, though, the firm has a clear long-term competitive advantage that’s still firmly intact.

Compared to other companies, the firm has much lower costs. This comes from focusing exclusively on government-funded programmes and migrating all new patients onto a single system. 

This puts the firm in a much better position to make it through a downturn in 2026. As a result, I actually see the falling share price as a potential buying opportunity. 

Investing with the best

There’s some disagreement about whether the UnitedHealth investment was made by one of Berkshire’s other managers. But a lot of people think it has the hallmarks of a Buffett investment.

Even so, investors can’t just follow Berkshire into the stock without paying close attention. One of the things Buffett says frequently is that investors should stay within their own circle of competence. 

Molina, however, has some long-term advantages that I think even an investor like me can understand. The firm has a cost advantage over its rivals and it’s easy to see why that’s important.

As a result, I think the crashing share price makes the stock look very attractive. So – for my own reasons – I’m going with Michael Burry over Warren Buffett on this one.

The post Down 25%, should investors buy this stock for less than Warren Buffett? appeared first on The Twelfth Magpie.

I suspect a lot of UK investors are unlikely to have heard of Molina Healthcare (NYSE:MOH). I’ve been taking a closer look though, and I like the look of what I’m seeing… very much. 

Medicaid

Medicaid is the US government’s healthcare provision for – primarily – low income individuals. It’s administered by individual states via a series of private companies that make the care happen.

Molina Healthcare’s one of these providers. The basic idea is that it gets money from a state and uses this to connect patients to doctors, hospitals, or whatever else they need in terms of healthcare.

Around 80% of Molina’s revenues come from Medicaid and that makes it vulnerable to changes in government policy. And such changes are why the stock’s down 36% in the last 12 months. That’s the risk – and there’s not much the company can do about it.

But I think the business has some unique advantages that make the falling share price a potential buying opportunity. 

Costs

Medicaid providers can’t increase the amount they charge individual states so the amount they get is fixed. What they can do however, is keep their own costs low – and Molina excels in this area.

Providers are required to spend at least 85% of what they receive on care. That means their profitability comes down to how they use the remaining 15% to cover their operating expenses. This is where Molina separates itself from other providers. Its cost ratios are typically lower than the likes of Centene, Elevance Health, or UnitedHealth Group and this is a huge advantage.

Lower costs mean the firm can keep making money while others are barely breaking even – 2025 being a good example. And this is why the stock jumps out at me from a buying perspective.

Molina’s advantage

The obvious question is why Molina’s able to keep its costs lower than competitors – and why the likes of UnitedHealth can’t do something similar. There are several reasons.

One is the company’s focus on government-funded programmes. This means it avoids the costs that other businesses incur in marketing to employers that provide healthcare for employees.

A bigger reason though, is focus. This shows up in both the firm’s IT systems (where it uses a single platform) and in its physical presence (where it avoids separate offices in individual states). 

This means Molina has much lower staffing requirements. And this translates into a cost structure that rivals can’t match without spending billions on a digital transformation and reducing staff.

Investment thesis

Having lower costs than the competition is one of the most important advantages a business can have. And when that’s a long-term strength, I get the interested in the stock as a potential investment.

I think this is the case with Molina Healthcare. That’s why I’ve been seeing the ongoing challenges in the US healthcare sector as an opportunity to start buying the stock for my portfolio.

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