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Warren Buffett Enlarges DaVita Stake as Company Expands

By: GuruFocus
Posted: 1/17/2013 3:13:00 PM
Referenced Stocks: DVA;FMS

As DaVita ( DVA ) continues to expand, so too does Warren Buffett 's stake in the company. Berkshire Hathaway ( BRK.A )( BRK.B ) on Jan. 9 increased its holding in the company by 1.3%, the latest of a string of 12 DaVita share purchases it made since October, according to GuruFocus Real Time Picks . The move is also its second of the new year, as DaVita began partnering with competitor Fresenius Medical Care ( FMS ) though its DaVita Rx pharmacy, and made headway in Europe.

The purchase made Berkshire 14.65% and largest owner of DaVita, followed at a distance by 5.52% holder Vanguard Group. DaVita has earned an eighth spot in Buffett's selective portfolio of high-quality, predictable companies he likes to hold for the long term.

2013 hardly commenced before DaVita took two significant growth steps. On Jan. 8, it announced it will partner with Fresenius Medical Care, another leading dialysis services and products provider with a 33% share of the dialysis market in 2011. Under the agreement, FMC will use DaVita Rx prescription drug services to fill and ship oral medications to its U.S. Medicare patients.

Created in 2005, DaVita Rx is the first and largest full-service pharmacy catering exclusively to kidney patients. The partnership will help Fresenius comply with Congress' mandate that all oral end-stage renal disease medications be included in the bundled payment model by 2016.

DaVita also announced Jan. 7 that it acquired nine dialysis centers from Fresenius, located in Portugal and Poland. The acquisitions bring DaVita's total number of dialysis centers outside the U.S. to 33, along with its 1,912 centers in the U.S.

DaVita is a high-growth company, with revenue increasing at an annual rate of 19% for the last 10 years. In the same time, EBITDA grew at 21.4%, free cash flow grew at 9.8% and book value grew at 34.7%.

DVA data by GuruFocus.com


Its midday trading price of $109.07 is close to its 10-year high. Its P/B of 3.77 is close to a one-year high, and its P/S of 1.46 is close to a three-year high. DaVita has a P/E of 19.8.

Berkshire began picking up DaVita shares in the fourth quarter of 2011, when the price was much lower, just $71 a share on average. It is likely that one of Buffett's new portfolio manager recruits, Ted Weschler, is the one making the trades, rather than Buffett himself.

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