DaVita HealthCare Partners (DVA) a leading kidney-dialysis provider, has been on a tear this year, rising nearly 50%. But that hasn’t kept margin-of-safety conscious Berkshire Hathaway (BRK-B) from continuing to buy up shares.
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Berkshire entered the year owning just under 2.7 million shares of DaVita. At the end of the third quarter that stake had grown to nearly 10.2 million shares. So far in the fourth quarter, Berkshire has added on another 3 million plus shares to bring its current DaVita stake to 13.6 million shares. (While most Berkshire portfolio changes are reported on a quarter-end basis, Berkshire now owns more than 10% of outstanding DaVita shares, requiring its trading activity to be reported on a daily basis.)
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Berkshire has been adding to the stake consistently throughout the fourth quarter, but stepped up the pace as the stock came off its highs. Between the last week of November and the end of last week, Berkshire added more than 1.1 million shares.
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So what’s with all the buying as the stock has soared this year? As Ycharts contributor Dee Gill laid out early this fall, DaVita is a rare breed: a growth stock that lets you sleep at night. That sounds a whole lot like Berkshire material. (Note:the DaVita stake is considered the handy-work of Buffett investing lieutenant Ted Weschler who owned the stock for the hedge fund he ran prior to joining Berkshire Hathaway.)
Berkshire's involvement has perhaps helped pushed up DaVita's valuation, as measured by PE ratio, this year.
While it’s well worth noting any time a respected investment shop increases a stake by 30% in a short period, Berkshire’s DaVita position needs some context. The current market value of Berkshire’s stake is $1.5 billion. Meanwhile, Berkshire Hathaway’s stake in Coca-Cola (KO) is around $15 billion and its Wells Fargo (WFC) position is worth about $14 billion. The $1.5 billion riding on DaVita is just 2% of Berkshire’s $75 billion investment portfolio.
DaVita total market cap is $10.9 billion. A bit of complete conjecture: If Berkshire Hathaway wanted to it could easily buy out the company and still have plenty left over to bag bigger elephants.
That said, Berkshire now owns more than 14% of outstanding shares, and recent activity suggests that by month end that stake could be even higher.
Carla Fried, a senior contributing editor at ycharts.com, has covered investing for more than 25 years. Her work appears in The New York Times, Bloomberg.com and Money Magazine. She can be reached at email@example.com.