Billionaire Warren Buffett recently cut his holdings in this name from the Berkshire Hathaway Inc. portfolio. It fell 53% in one day. investors need to know that

Fuzzy Panda Research alleges that the short-selling machineGlobe Life (NYSE: GL)The company's stock price plummeted more than 53% in a single day last week after the fraud. warren Buffett)Group of companiesBerkshire Hathaway)( New York Stock Exchange Stock Codes: BRK .A) (New York Stock Exchange: BRK).B) had a long history of holding the company's stock.

If you're looking to buy a stock when it's down, there are some things you'll want to know.

Global Life's troubles began last year.

Globe Life is one of Berkshire Hathaway's longest-held investments and has been part of the group's portfolio for more than 20 years. Resoncorp's holdings in Globe Life have weathered several difficult economic times, including the COVID-19 pandemic, which drove up claims costs and put tremendous pressure on life insurers.

Warren Buffett looks at the character and credibility of the Koon Management team when investing. Buffett and his team have an excellent track record of evaluating management, which has contributed to the long-term success of the conglomerate. Berkshire withdrew its investment in Global Life when it became the subject of several lawsuits alleging improper behavior.

Last year, two Global Life subsidiaries, American Income Life Insurance Company and Arias Agency, faced lawsuits alleging workplace misconduct that included rampant drug use, sexual abuse, and the demeaning treatment of agents who failed to meet sales goals.

Globe Life continues to struggle after a former Koon claimed he was fired for exposing "potentially illegal" sales practices at a subsidiary. The allegations appear to be the reason Berkshire sold its stake in the insurer last year.

Here's what short seller Fuzzy Panda has to say about the insurance company

Globe Life's troubles have been mounting this year, and on March 6, the U.S. Department of Justice issued subpoenas to Globe Life and American Income Life. The subpoenas are part of an investigation into allegations of fraud and impropriety by the Arias Organization (renamed), which is now one of American Income Life's organizations.

Last week, short seller Fuzzy Panda Research accused Global Life of "widespread" insurance fraud, but Goon's management ignored the allegations. According to Breakout Point and Bloomberg, Fuzzy Panda Research is the best active short seller in 2023. While short sellers - investors trying to profit from falling stock prices - lost a lot of money during the long bull market of the 2010s, they can help expose harmful or outright fraudulent business practices.

Fuzzy Panda searched hundreds of court documents and interviewed former Koon and agents, "who showed us where the fraud was hidden". According to short sellers, Goon was "obviously reported hundreds of times," but Goon's management did not see the fraud. After the release of the short-selling report, Global Life's stock plummeted by 53% in one day.

Following the serious allegations made by Fuzzy Panda, Universal Life responded, "We have examined the report and found it to be false:

Buy low?

According to The Fly, analysts think the stock sell-off is excessive, but there are still big question marks. Investment banks and firmsPiper SandlerGlobal Life's response, it said, "has helped to alleviate concerns, but it does not completely remove the vacuum, which remains in the absence of wider communication with the investment community on the matter.

Meanwhile, another investment company Evercore considered that there was limited downside for the company's share price, but that there was still a "material uncertainty".

Global Life is facing serious allegations, and the share price reflects this. After a sharp sell-off, aggressive investors may find the stock ripe for the picking. But if you're willing to take that risk, don't bet too much.

However, given the uncertainty of the situation and the Justice Department's investigation, most investors would be wise to wait and see what happens and avoid the stock for the time being.

Should you invest $1,000 in Global Life now?

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Courtney Carlsen does not own any of the stocks listed above. the Motley Fool holds shares of recommended Berkshire Hathaway Inc. the Motley Fool has a disclosure policy.

Billionaire Warren Buffett recently cut his holdings in this stock from the Berkshire Hathaway Inc. portfolio. It fell 53% in one day. what investors need to know. Originally published by The Motley Fool.