Molina Healthcare

Molina Healthcare is the textbook Michael Burry contrarian setup of 2026. The stock trades at $185.17 — down 44% from the May 2024 high of $333 — after a brutal 18-month margin collapse driven by Medicaid redetermination and adverse selection in the ACA marketplace book. Burry's Scion Asset Management disclosed a 90,000-share position in the Q4/2025 13F (roughly $14M at entry, around 0.9% of Scion's reportable portfolio). The position was added to in Q1/2026 per the May 15, 2026 filing — now ~160,000 shares.

The damage in the financials is severe. Q1/2026 EPS came in at $4.81 vs. $5.62 consensus, full-year 2026 EPS guidance cut to $19–$20 (from $22.50 at the start of the year), and earnings growth printed -95% YoY off the prior comparable. The medical-loss ratio (MLR) — the single most important metric for managed-care insurers — blew out to 90.9% in Q1/2026 from 88.1% a year prior. Each 100 bps of MLR translates to roughly $430M of pre-tax income on Molina's $43B revenue base.

The setup that interests Burry: Medicaid rate-setting is a regulated process with a 12–18 month lag. States cut rates in 2024–2025 assuming a lower-acuity post-redetermination membership pool, but the reality was the opposite — sicker, more expensive members stayed on the rolls. States are now resetting rates upward (Texas +5.2% in March 2026, Florida +4.8% in April), but the impact lags by 6–12 months. The earnings recovery is mechanical if rate-setting normalizes.

Burry's MOH position is unusual for Scion in two ways. First, healthcare-services is not his historical wheelhouse (he is best known for housing in 2008 and semis/water in the 2020s). Second, the position size (~0.9% of reportable book) is small for Burry, who tends to concentrate aggressively. Both factors suggest this is an option-like contrarian bet — high asymmetry to a recovery, but sized for the case where it does not happen.

Notable accompanying activity: Pzena Investment Management (deep-value shop) added 1.4M shares in Q1/2026, becoming a 1.4% holder. Dodge & Cox kept their 4.8% position unchanged through the drawdown. The notable seller was Capital Group, which trimmed 2.1M shares in Q4/2025 — but their full position remained at 7.8M shares. Index funds (Vanguard, BlackRock) have been net buyers via mechanical S&P 500 mid-cap inclusion flows.

Insider activity (Form 4): CEO Joseph Zubretsky did not buy on the open market during the drawdown — notable for absence. CFO Mark Keim sold 8,000 shares in February 2026 at $165 (routine 10b5-1 plan, scheduled in 2024). No directors bought. The absence of insider buying at the lows is the cleanest bear signal in the data — management is not signaling conviction.

Molina Healthcare trades at a forward P/E of 20.4, P/E of 49.5 on trailing earnings, and P/B of 2.36 as of May 2026. The forward multiple is misleading because consensus EPS estimates ($9.07 for 2026) reflect the rate-reset recovery scenario. Comparable Medicaid managed-care insurers — Centene (forward P/E 12, P/B 1.6) and Elevance Health (forward P/E 14, P/B 2.4) — trade at materially lower forward multiples. The Wall Street median price target is $180.69 — essentially flat to current price (-2.4%) — with dispersion from $129 (bear, Goldman Sachs, MLR doesn't normalize) to $262 (bull, Wells Fargo, full rate-reset by 2027). Sum-of-the-parts: Medicaid segment at ~$140/share assuming MLR normalizes to 89%, Medicare segment at ~$30/share, Marketplace at ~$15/share (write-down possible). Two-year scenario probability-weighted: 35% bull case ($270), 35% base case ($190), 30% bear case ($130) — expected value ~$201, modest 9% premium to current. Not a 'cheap-on-numbers' situation — purely a contrarian-thesis bet.

1. July 31, 2026: Q2/2026 earnings — MLR direction is everything; any improvement below 90.5% would shift the narrative
2. September–October 2026: Texas and Florida rate increases take effect — the first quarter showing the impact is Q4/2026
3. November 2026 (post-midterms): ACA enhanced-subsidy renewal vote — extension would meaningfully reduce marketplace tail-risk

Molina Healthcare is not a buy I'd build my portfolio around — it is a contrarian asymmetric bet that requires Burry's conviction and his risk tolerance for being wrong loudly. The bull case (rate-reset normalizes MLR by 2027–28, stock doubles) is mechanically sound but assumes states follow through and ACA subsidies extend. The bear case (structural marketplace impairment plus enhanced-subsidy expiration) is equally plausible. I would not size this above 1–2% of a portfolio. The cleanest signal in the data is the absence of insider buying — management is not putting their money where Burry's is. That asymmetric information matters. If I were going to take the bet anyway, I'd wait for the Q2 print on July 31 and look for a single quarter of MLR improvement before sizing in. Otherwise, watch from the sidelines and let Burry be early.