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Michael Burry’s Contrarian Bet on Molina Healthcare (MOH): Why the “Big Short” Investor Just Dove Into a Medicaid Meltdown
A Contrarian Classic: Buying Healthcare in Crisis
When Michael Burry takes a position, markets pay attention—and his Q3 2025 buy of 125,000 shares of Molina Healthcare worth roughly $23.9 million was no exception. He moved in while healthcare stocks were crumbling, betting that panic had buried value in plain sight.
The broader context was ugly. Healthcare was one of the market’s worst-performing sectors that quarter, down about 6%, while Big Tech pushed the S&P higher. Medicaid-focused managed care companies like Centene, Humana, and UnitedHealth were all slammed by soaring medical costs, utilization spikes, and political uncertainty.
Then came the overreaction: Molina’s shares crashed nearly 20% in a single day—not because of bad news of its own, but because Centene issued a profit warning. The market punished everyone, and that’s when Burry likely saw opportunity.
The Setup: Deep Fear, Deep Value
By the time Burry stepped in, Molina’s valuation metrics looked almost absurdly low for a Fortune 500 healthcare company:
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EV/Sales: ~0.3x
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Trailing P/E: ~11x
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Forward P/E: ~10x
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EV/EBIT: ~7x
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PEG Ratio: ~1.0
Those numbers don’t describe a broken business—they describe one that’s been ignored or misunderstood.
And that’s the essence of Burry’s style: find strong fundamentals buried under temporary chaos.
The Hidden Strength: Molina’s Efficiency Moat
The market saw “Medicaid insurer.” Burry saw one of the most efficient operators in the entire industry.
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Five-Year Average ROIC: ~42%
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Debt-to-Equity Ratio: ~0.9
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Administrative Expense Ratio: ~7% (vs. ~10% for most peers)
That last metric—admin expense ratio—is Molina’s superpower. In a business where margins are razor thin, saving 3 cents on every premium dollar makes the difference between surviving and bleeding.
When the Medical Care Ratio (MCR) across the industry spiked to around 92% (meaning companies were paying out 92 cents of every premium dollar in care), most insurers were underwater. But Molina, with its lower overhead, stayed marginally profitable.
It’s not glamorous—but it’s the kind of operational edge that defines long-term compounders.
Explaining MCR Like You’re New to Healthcare
Here’s how it works:
The government pays Molina a flat fee per member per month—say $1,000. Molina spends most of that covering medical costs. The MCR measures what percentage of that goes directly to care.
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If MCR = 85%, Molina spends $850 on care and keeps $150 for admin + profit.
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If MCR = 92%, it spends $920—leaving only $80.
Now, if your admin costs are 10%, you’re losing money. But if they’re only 7%, you’re still above water. That’s Molina’s edge—and it’s why Burry was willing to buy when everyone else was terrified.
How Molina Became the “Walmart of Medicaid”
Before 2017, Molina operated more like a mission-driven nonprofit than a disciplined public company. Then CEO Jose Zubretzky took over and rewired the entire business around what insiders call the “Molina Playbook.”
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Tight cost control
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Streamlined operations
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Smart use of IT and data analytics
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Relentless focus on government-backed plans (Medicaid, Medicare, ACA exchanges)
This efficiency not only stabilized Molina but fueled its roll-up strategy—buying smaller, less efficient insurers and improving their margins.
In five years:
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~$2.6 billion spent on acquisitions
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~1.2 million new members added
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~$9–10 billion in annual revenue gained
By acquiring companies with higher admin costs (10–12%) and bringing them down to Molina’s 7%, management unlocks profit almost instantly. It’s not flashy—but it’s quietly powerful.
The Redetermination Shock: Why the Market Panicked
When pandemic-era protections ended, states started checking who still qualified for Medicaid. This “redetermination” process kicked off millions of members—mostly healthier, lower-cost ones.
The result: Molina’s membership shrank about 3%, versus 8% for the industry overall, but the remaining pool got sicker and more expensive. That shift drove up costs, inflated the MCR, and rattled investors.
Burry’s logic: this isn’t permanent. It’s a mechanical policy shock, not a fundamental collapse.
Q3 2025: The Pain Hits the Numbers
Molina’s latest quarter confirmed the short-term pain was real—but also clarified where it was coming from.
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Revenue: Up 12% year-over-year to $10.8 billion.
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EPS: Down 73% (GAAP) and 69% (adjusted).
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Consolidated MCR: 92.6% (up from 89.2%).
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Medicaid Segment: Still profitable at 92.0% MCR.
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Marketplace Segment: Bleeding at 95.6% MCR.
In other words, the core business was fine—it was the ACA marketplace dragging down results.
Management’s fix is straightforward: restore marketplace profitability or shrink it. And they’re doing it while keeping their G&A ratio near 6.3%, proving the cost discipline is intact even during crisis.
Cash Flow and Confidence: The Boldest Signal Yet
Operating cash flow swung from +$868 million in 2024 to –$237 million in 2025, mostly due to timing issues with risk-sharing payments. Still, management kept buying back stock through the downturn—a clear vote of confidence that the pain is temporary and the shares are undervalued.
This is exactly the type of insider behavior Burry looks for: conviction backed by capital.
The 2027 Target: $36 EPS and a CEO with Skin in the Game
Zubretzky isn’t just managing through the storm—he’s incentivized to deliver a massive rebound.
If Molina hits $36 in EPS by 2027 (up from ~$14 expected in 2025–26), he earns 150,000 additional shares—a multi-million-dollar reward directly tied to performance.
That alignment between management incentives and shareholder returns is central to Burry’s thesis: the people running the business have every reason to fix it fast.
Bull Case vs. Bear Case: The Real Debate
Bull Case:
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Rate resets from state governments catch up to inflation and utilization.
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Marketplace business stabilizes or turns profitable.
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Efficiency moat continues protecting margins.
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M&A adds accretive members and revenue.
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Cash flow normalizes, EPS doubles by 2027.
Bear Case:
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Medical costs keep rising faster than rate increases.
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Further Medicaid enrollment losses skew risk pool higher.
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Marketplace recovery drags longer than expected.
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Operating cash flow remains volatile.
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EPS stagnates, missing the 2027 incentive target.
Burry’s Bet in One Sentence
Michael Burry is betting that Molina’s efficiency outlasts the panic.
That its 42% ROIC, disciplined culture, and cost edge will ultimately overcome the policy volatility that crushed its peers.
It’s not a smooth ride—but for contrarians, volatility is just the toll you pay for mispriced quality.
Investor Takeaways
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Molina’s problems are sectoral, not structural.
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Its Medicaid engine remains fundamentally profitable.
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Policy-driven MCR spikes are cyclical, not permanent.
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CEO incentives align with aggressive EPS recovery.
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Valuation still reflects fear, not fundamentals.
Burry didn’t buy Molina because it’s pretty—he bought it because it’s temporarily mispriced, operationally excellent, and built to survive.
That’s not speculation. That’s deep value.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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