Berkshire Hathaway, the diversified conglomerate led by Warren Buffett, has continued to adjust its substantial holding in DaVita (DVA), a prominent provider of kidney dialysis services. These recent divestments come after a significant appreciation in the value of Berkshire’s initial investment in the healthcare company, whose stock price has quadrupled since the original acquisition.
Strategic Divestment
Recent regulatory filings indicate that Berkshire Hathaway sold an additional 200,010 shares of DaVita across various transactions between May 22 and 27. This activity follows previous sales, including 750,000 shares divested in late February. Despite these recent actions, Berkshire remains DaVita’s largest institutional investor, holding approximately 42.3% of the company’s outstanding shares, according to FactSet data. DaVita continues to constitute the tenth-largest position within Berkshire’s extensive investment portfolio.
It is crucial to note that these recent share sales are separate from an agreement finalized in April 2023. Under that arrangement, DaVita committed to quarterly share repurchases intended to progressively decrease Berkshire’s ownership percentage to 45%.
DaVita’s Operational Landscape
Berkshire’s decision to realize profits aligns with a challenging period for DaVita. The Denver-headquartered company is presently managing increasing patient care expenses and broader operational costs. Moreover, DaVita has recently faced disruptions from natural disasters and a cybersecurity attack, exacerbating existing pressures from evolving regulatory frameworks and complexities in healthcare service reimbursement within the dialysis sector.
Regarding market performance, DaVita’s stock has seen approximately a 9% decline year-to-date, after two consecutive years where the stock achieved impressive 40% annual growth. Despite these short-term movements, the long-term trend for Berkshire’s investment has been exceptionally favorable, with the stock price having quadrupled since Berkshire initially acquired shares in 2011.
Origins of the Investment
The original investment in DaVita is primarily credited to Ted Weschler, one of Berkshire Hathaway’s portfolio managers. Weschler had previously invested in DaVita with his personal fund before joining Berkshire in 2011. In 2014, Weschler elaborated on his justification for the investment, underscoring DaVita’s dedication to “best quality of care,” its strong return on capital, predictable growth path, and a management team committed to shareholder value. He also highlighted the company’s efficiency in producing substantial net savings for the healthcare system.
Founded in 1994, DaVita is a leading healthcare provider in the United States, delivering vital kidney dialysis services through both in-home treatments and a wide network of outpatient clinics.
Sophia Patel brings deep expertise in portfolio management and risk assessment. With a Master’s in Finance, she writes practical guides and in-depth analyses to help investors build and protect their wealth.