Warren Buffett eliminated this stock from Berkshire’s portfolio last year. It has fallen 32% in the first half of 2024.

Last year, Warren Buffett and his team at Berkshire Hathaway eliminated its participation in Life in the world (NYSE:GL)a stock that had been in its portfolio for more than two decades. The company faced serious legal troubles last year and suffered a sharp decline earlier this year when it was the subject of a short-seller report.

Globe Life shares have fallen 32.4% since the beginning of the year, according to data from S&P Global Markets InsightsHere’s what investors need to know about the decline and what’s next for Globe Life.

Globe Life faces serious charges

Last year, storm clouds began to gather over Globe Life when one of its subsidiaries, American Income Life Insurance Co. and Arias Agencies, was hit with a lawsuit accusing it of inappropriate workplace conduct, including widespread drug use, sexual abuse and degrading agents who didn’t meet sales targets. The problems were compounded by accusations from a former executive who said he was fired for blowing the whistle on “potentially illegal” sales practices.

Warren Buffett, who emphasizes the character and integrity of leadershipBerkshire Hathaway Corp. apparently took the accusations very seriously, and Berkshire sold its stake in the insurer last year. While not a large position, it has long been a staple of Berkshire Hathaway’s portfolio since 2001.

Investors seemed to shrug off those accusations as 2024 approached. Then, on March 6, the U.S. Justice Department issued subpoenas to Globe Life and American Income Life as part of an investigation into allegations of fraud and misconduct at one of its major life insurance agencies.

In early April, Globe Life suffered another blow when short seller Fuzzy Panda Research has accused the insurer of “massive” insurance fraud that was ignored by management. The short seller interviewed former employees “who showed us where the fraud was hiding” and that the fraud was ignored by management despite being “obvious and reported hundreds of times.”

What’s next for Globe Life?

Globe Life has since recovered from its low of $39 per share since the report was released, indicating that the sell-off may have been overdone. Today, the company is valued at a very cheap 8.2 times earnings.

However, the company continues to face questions and received “an informal preliminary inquiry from the SEC” in May to investigate the short-seller allegations. While not a formal SEC investigation, these issues represent a risk and will be a risk to Globe Life’s stock for the time being.

The story continues

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