According to a filing with the SEC, Warren Buffett’s holding company Berkshire Hathaway has continued to buy shares of DaVita HealthCare Partners Inc (NYSE:DVA), a $12 billion market cap provider of kidney dialysis services at hospitals and dialysis centers. Adding over 600,000 shares of the stock in early July, Berkshire reported close to 16 million shares of the stock as of July 3rd. As a result Buffett’s stake in the company is worth about $1.8 billion at current prices. We track quarterly 13F filings from hundreds of hedge funds and other notable investors such as Berkshire as part of our work researching investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year); according to our database, Buffett’s company owned about 15 million shares as of the end of March (find Buffett’s favorite stocks).
In the first quarter of 2013, DaVita HealthCare Partners Inc (NYSE:DVA)’s net patient service revenues increased by 12% versus a year earlier, with overall revenue growing to a greater degree due to the company’s merger with Health Care Partners, now a subsidiary of the business. DaVita HealthCare Partners Inc (NYSE:DVA) wrote a $300 million loss contingency reserve during the quarter, which caused its pretax income to be much lower than its levels a year ago; if we add back that reserve, however, we get a 39% increase in income before taxes.
Because of the recent acquisition and the contingency reserve, trailing EPS numbers aren’t that relevant to DaVita HealthCare Partners Inc (NYSE:DVA)’s valuation and we can’t really use the Q1 numbers as a guide to future performance either. Wall Street analysts are predicting that earnings per share for this year will come in at $7.51- making for a current-year P/E multiple of 15- and then experience only weak growth in the next year. That’s a decent valuation, although the company would probably need to grow its earnings at a somewhat faster rate going forward than the sell-side is projecting in order to be a buy at these prices. In addition to Berkshire’s interest, we can see that at the end of Q1 2013 billionaire Stephen Mandel’s Lone Pine Capital had about 2 million shares of DaVita HealthCare Partners Inc (NYSE:DVA) in its portfolio (see Mandel’s stock picks). D.E. Shaw, a hedge fund managed by billionaire David Shaw, disclosed ownership of 1.8 million shares (research more stocks D.E. Shaw owned).