Buffett bought UnitedHealth. I bet on Caterpillar. Why Berkshire Hathaway's picks are smarter.

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18 hours ago

I told MarketWatch readers on Aug. 14 that Warren Buffett was about to reveal one big mystery elephant for Berkshire Hathaway's portfolio — one $5 billion investment in the shares of an industrial giant. The most likely candidate? Caterpillar CAT. I ventured that Deere DE, UPS UPS and Honeywell International HON had a shot as well.
It would be just like Chubb CB. Just like Chevron CVX. Just like every other time Buffett has played this SEC 13-F filing confidentiality game.
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I'm a senior who barely survives on $1,300 a month. No way could I live on $1,000.
Buffett bought shares of six different companies instead.
When $4.8 billion showed up in Berkshire's BRK.A CO:BRKB 'Commercial, industrial and other' category, I did what any pattern-matching monkey would do: I looked for one $5 billion company. Caterpillar fit perfectly. The investment narrative sang. And the stock showed a healthy 26% increase in daily trading volume.
But while I was hunting for one elephant, Buffett was rounding up a herd. Six companies, one theme: betting on what Americans need.
The beautiful irony? My industrial thesis was actually right. Buffett did put $4.8 billion into commercial and industrial companies. He just spread it around like peanut butter instead of dropping it like a brick.
Here's what Berkshire actually bought.
The big three:
The smaller plays:
That's $4.2 billion in new elephants, with spare change for the old herd.
Read: Warren Buffett places new bets on UnitedHealth and a residential builder, sending their stocks soaring
Warren Buffett just put $1.57 billion into UnitedHealth, a company that discovered the perfect business model: running American healthcare like a casino where the house performs your surgery.
UnitedHealth isn't competing in healthcare. Through its Optum tentacle, it owns the doctors, the pharmacies, the data and the payment systems.
Here's the beautiful part: The stock trades at 30%-50% below value because of 'regulatory concerns.' Translation: Politicians are grandstanding about Medicare Advantage rates. Buffett's seen this movie before. Congress threatens, UnitedHealth reminds them who processes healthcare for 53 million voters, Congress caves. You don't kill the company that's keeping grandma's insulin flowing.
UnitedHealth's numbers are obscene: $20 billion in free cash flow annually. Pure profit after feeding all the lawyers and lobbyists. Every day, 10,000 Americans turn 65 and stumble into Medicare. UnitedHealth owns 29% of that market and is using artificial intelligence to 'optimize patient outcomes' — Silicon Valley speak for 'charge more, deliver less, but with algorithms.'
At around $300 a share currently, you're buying a tollbooth to the cemetery at a big discount. The only question is whether you can stomach profiting from a system where getting sick is the only growth industry that never disappoints.
Lennar and D.R. Horton build the architectural equivalent of Wonder Bread: bland, identical suburban boxes that offend aesthetes and delight mortgage brokers. Buffett just put $1.47 billion into these merchants of mediocrity, and the math is gorgeous.
America is 4 million homes short. Not 4 million mansions or condos with exposed brick. Four million basic shelters. The average millennial is 33 years old now, which means they've finally accepted that their band isn't getting signed and it's time to buy a lawn mower. Gen Z is right behind them, about to discover that 'authenticity' is harder to maintain with a mortgage.
Lennar got $1.23 billion of Berkshire's money because it's the Amazon.com of home building — that is, if Amazon sold only one product that took six months to deliver. Lennar owns land positions that smaller builders can't touch and the stock trades at 10 times earnings, while the housing shortage gets worse faster than Congress can pretend to fix it.
D.R. Horton got $240 million for building starter homes, those peculiar American inventions where 'starter' means you'll die there but with a slightly better kitchen. The company doesn't build dreams; it builds the boxes where dreams go to set up 30-year payment plans.
At current prices, both stocks are priced for a housing crash that demographics won't permit. Every day, more millennials realize their parents were right about everything — including homeownership.
Buffett's $1.47 billion investment in housing says: Americans will keep procreating and wanting doors that lock, regardless of interest rates, recessions or whoever's pretending to run things in Washington.
While I was tracking bulldozers, Buffett put $860 million into Nucor, buying American steel wrapped in the flag.
Nucor wins from every angle: Politicians treat foreign steel like a national-security threat, federal contracts require American metal, and tariffs protect domestic prices. Nucor throws off $2.5 billion in free cash during recessions and has paid dividends for 52 consecutive years.
This is Buffett's perfect hedge: If America builds, he wins on demand. If America just blocks imports, he wins on artificial scarcity. Buffett's own BNSF Railway needs Nucor's steel, creating a circle where he pays himself.
Lamar Advertising ($160 million investment) owns billboards that can't be blocked from view. Its prime highway signage is locked up for decades to come. The stock yields more than 5% and has paid 11 years of consecutive dividends.
Allegion ($110 million) makes locks and security systems. The stock has a modest 1.22% yield, but the company has raised dividends for 11 straight years. Until humans stop locking doors, Allegion profits from paranoia.
These aren't must-own stocks unless you're cosplaying as Buffett. They're just the Oracle of Omaha collecting rent on businesses too boring to disrupt.
If you bought Caterpillar on my recommendation, you own a great company with a $37.5 billion backlog whose shares are trading at a discount. You just didn't get the Buffett blessing.
The real lesson? Buffett bought inevitabilities, not possibilities. Aging is guaranteed. Housing shortages are mathematical. That's the playbook: Bet on what must happen, not what might happen. Bet on human nature.
While I tracked bulldozers, Buffett counted birthdays and bedrooms. While I bet on what America might build, he bet on what Americans must have.
The Oracle counts things that can't be stopped: aging, procreating and protecting domestic industries from competition. That's not investing; that's actuarial arbitrage.
I'll keep swinging for the fences, because someone has to. That's what separates financial writers from index funds: We're wrong in public, with style, and occasionally we nail something spectacular enough to justify our existence.
Class dismissed. Crow digested. I'm long on humility and short on bulldozers.
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Also read: Here's the real reason Berkshire Hathaway holds almost $350 billion in cash right now
More: ​Trump is creating a perfect tax for corporate America — one it'll pay. Here's what to watch.
Why UnitedHealth? Buying the stock was actually a 'classic Buffett move.'
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