Getting to the top of a list of stocks, based in part on one-year and five-year returns will, of course, often require a lofty valuation, and Bloomberg BusinessWeek’s BBW50 Top stocks is no exception.
Nos. 1 and 5, respectively, Actavis (ACT) and Alexion Pharmaceuticals (ALXN) have PE ratios that are merely sky-high, having their shares bid up on enthusiasm for, respectively, generic drugs and orphan drugs.
That leaves No. 3, DaVita (DVA), alone among the top five with a sane PE ratio. The dialysis business, sadly, grows steadily as unhealthy people suffer kidney failure, and DaVita and its competitors grow steadily and profitably. That predictable growth may be what attracted one of Warren Buffett’s new-ish asset managers at Berkshire Hathaway (BRK-B), Ted Weschler, to DaVita shares.
Jeff Bailey, The Editor of YCharts, is a former reporter, editor and columnist at the Wall Street Journal and New York Times. He can be reached at email@example.com.
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