Warren Buffett's Berkshire Continues to Buy DaVita (DVA) ~ market folly

Friday, October 19, 2012

Warren Buffett's Berkshire Continues to Buy DaVita (DVA)

Warren Buffett's Berkshire Hathaway has continued to buy shares of DaVita (DVA), according to two separate Form 4's filed with the SEC in recent days.  We've previously highlighted how Berkshire was buying DVA late last month.

The most recent batch of SEC filings show that Buffett's conglomerate now owns 10,547,040 shares.  These trades took place on October 10-12th as well as the 16th and 17th.

Berkshire was buying in the $108.28 to $111.2125 range (using weighted average prices).  The bulk of Berkshire's purchase comes around $109.  In total from the two filings, Berkshire has purchased 281,525 additional shares of DaVita.

While this position size has become much larger over time, it seems likely that new portfolio manager Ted Weschler is responsible for the idea as it was one of his big holdings at his previous hedge fund.  And if you're a reader of our premium newsletter, you would have known that DVA was a consensus buy among hedge funds back in Q2.

Given that Berkshire nowadays focuses on buying great companies at a good price, it's interesting to see them continuing to buy shares even while DVA approaches 52-week highs.  If they assume that DVA will grow 20% annually, perhaps they're less concerned about valuation at current levels.  On the other hand, some investors have pointed to DVA's dependence on government payments as a potential negative.

Per Google Finance, DaVita is "a provider of dialysis services in the United States for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD)."

For more on Berkshire's leading man, head to notes from Buffett's meeting with MBA students.

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