On May 4, more than 30,000 investors descended upon downtown
Omaha, Neb., to join the "Oracle of Omaha" at the annual
Berkshire Hathaway shareholders meeting.
Like a rock concert mixed with the evangelical zeal of true
believers, this meeting has earned its label as the "Woodstock
ofcapitalism ." Not bad for an event that started in 1982 with
just 15 investors in an insurance company lunch room.
Not only has the annual meeting expanded, but
Berkshire Hathaway (NYSE: BRK-A)
has grown exponentially to become the most expensivestock in the
United States at more than $167,000 a share. Not to mention,
thebook value per share has increased an astounding nearly
600,000% over the history of the insuranceconglomerate 's
As Carla Pasternak, Chief Strategist of our
newsletter, recently pointed out, Berkshire Hathawayshares don't
yield adividend , even though the company's holdings paid out
$1.35 billion in dividends in the past quarter.
Clearly, investing directly in Berkshire Hathaway doesn't make
sense if you're looking for yield, and the share price is out of
reach for most of us. However, as you can see fromWarren Buffett
's stellar long-term performance, it makes good sense to be a
Buffett watcher and invest in the same companies as Berkshire
Buffett has spent years crafting the persona of a friendly,
frugal, grandfatherly investor -- but inside this affable
exterior resides the mind of an expert gambler and the heart of a
tiger. Investors can learn a tremendous amount from his
The lessons from this month's meeting include that Buffett
believesbonds are a terribleinvestment right now andstocks are
fairly priced. He believes strongly in big banks and thinks
health care is the topissue facing the United States.
Drilling into his words and recent actions reveals two
companies that Buffett may soon move to acquire.
DaVita HealthCare Partners (
Buffett has been ramping up his ownership in this health care
company over the past several years. He is currently the
company's largest shareholder with 13% of alloutstanding shares .
As you know, Buffett loves companies with sustainable competitive
advantages, and he buys only for the longterm .
DaVita is one of the largest dialysis providers in the United
States and serves more than 150,000 patients. Interestingly, the
DaVita interest originates from a relatively new Berkshiremoney
Hailing from the hedge-fund world, Ted Weschler is being
trained by Buffett to manage the entire portfolio eventually.
Weschler held a major stake in DaVita at his former firm and has
followed the dialysis business for years, making him an expert in
the company and sector.
The company just reported first-quarter results, beating
estimates on bothrevenue , with about $2.8 billion, andearnings
per share (
) of $1.84. With projected revenue of $11.65 billion andEPS of
$7.46 for its currentfiscal year , the firm is fundamentally
solid with strong long-term prospects. Combine the numbers with
Weschler's love of the business, and DaVita is likely on
Berkshire's short list foracquisition .
Campbell Soup (
Buffett loves the consumer products sector. He recently acquired
the king of ketchup,
H.J. Heinz (
, and has said that at the right price, he may be interested in
another large consumer product company.
Campbell's shares have rallied more than 30% thisyear , and
the company commands about 60% of the U.S. soupmarket . Rumors of
a Berkshire acquisition sparked the presentrally .
Campbell's boasts a 140-year history and a $15 billionmarket
cap .Sales increased 10% in its most recent quarter, to $2.33
billion. During the first six months of the year, the company
reported an 8% increase in adjusted EPS. Despite flatrevenues
andearnings in 2012, Campbell's increased its dividend payout to
Risks to Consider:
Both of these companies are solid fundamentally and
technically. However, headwinds exist that may deter Buffett from
making his move. Buffett loves to buyundervalued companies at low
prices, but both stocks are overpriced. In addition, Campbell's
soup is controlled by the founder's heirs. Buffett is interested
only in friendly acquisitions, so if the heirs don't want to
sell, Buffett is unlikely to pursue a deal.
Action to Take -->
I like both stocks as breakout close-entry candidates. Regardless
of Buffett's interest, they are both solid firms with strong
histories and brightfutures . While both companies are
speculative Buffetttakeover targets, DaVita appears to be the
more likely candidate of being acquired.
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