Shares in health insurance provider Molina Healthcare (MOH) jumped by nearly 4% Tuesday morning after prominent investor Michael Burry published a bullish case for the company on his blog, comparing Molina to Warren Buffett’s bet on GEICO.
In Burry’s blog post, the legendary investor of “The Big Short” fame said Molina “has a clearer path to significant double-digit long-term growth than Apple” and that he would acquire the company if he had the funds, according to coverage by Business Insider.
Molina is currently trading at a steep discount compared to where it started the year, down by roughly 40% since Jan. 1. The healthcare sector, meanwhile, has picked up roughly 13% over the same period.
Throughout the year, Molina has slashed its earnings projections multiple times and reported a large miss on earnings in the third quarter.
A growing share of the company’s business comes from plans under the Affordable Care Act, where ballooning costs have pushed Molina’s “medical loss ratio,” or the amount of premiums revenue it spends on patient care, up to 95.6%, far above the 86% rate Wall Street had been expecting.
Its consolidated medical loss ratio, averaging the figure across all Medicaid, Medicare, and Marketplace plans the company offers, came in at 92.6%, meaning the company was only able to keep 7.4% of premium revenues.
Burry noted that if federal budgetary actions push the market downward, Molina’s shares, currently trading at around $172, could drop below $100, which he labeled a “generational buy.”
“Here we have the best loss ratio, the best expense ratio, the best win rate, and the most conservative accounting in one insurer,” Burry wrote in his post.
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