Berkshire began accumulating DaVita shares in the fourth quarter of 2011, buying almost 2.7 million at an average share price of $71. It continued to buy more in the next three consecutive quarters at successively higher prices. In the third quarter, it bought its smallest amount yet – 897,569 shares for $98 each on average.
The most recent purchase occurred on Nov. 26: 412,050 shares for about $110 each, according to GuruFocus Real Time Picks.
DaVita is a leading kidney dialysis provider, second in market share only to competitor Fresenius (NYSE:FMS). It operates 1,912 outpatient dialysis center in the U.S., serving 150,000 patients, as of Sept. 30. It also owns 24 dialysis facilities outside the U.S.
In the last 10 years, the company has grown revenue per share at an annual rate of 18.6%, EBITDA at 17.8%, free cash flow at 10.8% and book value at 32.7%, according to its 10-year financial page.
DaVita began in 1999, as a result of the restructuring of a dialysis company verging on bankruptcy, Total Renal Care. A new CEO, Kent Thiry, joined that year and led the turnaround. In 2001, Ted Weschler – now a portfolio manager at Berkshire – had 30% of his portfolio at his hedge fund Peninsula Capital invested in DaVita. He kept a significant portion in the company thereafter until his departure for Berkshire in 2011, when Berkshire’s DaVita holding started up.
Weschler has an investing style similar to Warren Buffett. GuruFocus author Geoff Gannon examines why the manager may have so much confidence in the stock in his article, Why Ted Weschler Keeps Buying DaVita (NYSE:DVA).
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