DaVita Inc. (NYSE: DVA) is far from Warren Buffett’s and Berkshire Hathaway’s only medical services companies of the current and past portfolio. This one was one of the prior favorites of Ted Weschler who recently joined Berkshire Hathaway from Peninsula Capital recently. Last night’s news that DaVita was added into the Berkshire Hathaway portfolio seemed a surprise on the surface, but investors do tend to bring their favorite portfolio positions over with them when they go to a new job.
DaVita offers kidney dialysis services in the United States for patients suffering from chronic kidney failure or end stage renal disease. The problem (and the financial opportunity) is that without dialysis those patients will die.
As far as what it means, DaVita’s position is only 2.684 million shares worth some $203 million at the end of the quarter. At $84.75, the 52-week range is $59.14 to $89.76. DaVita also closed out the year 2011 at $75.81, so the position is worth even more if they have not added to it at higher share prices.
The company’s market cap is $7.92 billion and its average daily volume is only about 650,000 shares. The consensus analyst target is $87.49 and with earnings estimates of $6.22 EPS for all of 2012 the company trades at 13.6-times the next year’s earnings expectations. The company is also expected to generate $7.66 billion in sales in 2012, and those growth targets imply more than 20% earnings growth and about 10% sales growth for 2012.
JON C. OGG
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