Available at a Reasonable Price (Margin of Safety)
This is where the recent situation with UNH becomes particularly interesting from a Buffett perspective.
Depressed Stock Price: The company's stock price had fallen significantly, trading near a decade-low valuation at around 12 times earnings. This drop was a direct result of the aforementioned challenges.
Intrinsic Value: Buffett's approach is to buy a great business at a fair price. He often "pounces" when a quality company is temporarily out of favor. The drop in UNH's stock price, while its underlying fundamentals (like revenue and cash flow) remained strong, created a potential "margin of safety."
Strong Financials: Despite the challenges, UNH has continued to post strong financial results, including revenue growth. Its high return on equity (ROE) of over 20% and robust free cash flow are metrics that Buffett finds appealing, as they demonstrate the company's ability to generate cash for its owners.
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