Opportunities for value investors in the S&P 500 have been limited in recent years. But Molina Healthcare (NYSE:MOH) is one that’s been catching the attention of some big names recently.
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.
