Last Friday Berkshire Hathaway Inc. filed documents with the Securities and Exchange Commission stating that it now owns 35.1 million shares of DaVita.
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DaVita Healthcare Partners Inc. is the leader in kidney dialysis centres, and as Berkshire Hathaway CEO Warren Buffett is known for his appreciation of steady businesses with predictable cash flows and limited competition, owning a stake in the dialysis speciality fits the bill.
Nearly 3.7 million new DaVita shares were bought by Berkshire after the former reported its earnings late last week.
This means Berkshire now owns about 16.5% of DaVita, but in a stand-still agreement, the company has agreed it will not buy over 25% of the Denver-based company – unless both businesses agree to this at a later stage.
DaVita runs almost 2,000 outpatient dialysis clinics, and reported last week that it’s operating costs had increased over the past quarter, and that the Justice Department has investigated its business practices.
The stock was trading above USD 56, but after this report, the company quickly lost over USD 2 per share – and that is when Berkshire Hathaway began investing.
Berkshire Hathaway; to invest, or not to invest
Berkshire Hathaway’s successes are prolific and consistent, yet there are many key factors to take into account if you wish to place your money with investment wunderkid Buffett.
The first thing to note about Berkshire Hathaway’s stocks, if you aren’t already aware, is the expense.
One share of Warren Buffett’s multinational cost USD 168,205 last month, and chances are, it will only grow higher.
This is because Buffett only buys in solid yet inexpensive businesses which sell inelastic products and pay a dividend. This can be summarised into a three-point mantra: Low risk, cheap and high quality.
Whilst there are divergences, this is true for the bulk of his stock, including Wells Fargo and Coca-Cola, and has seen his company’s per value share grow a mind-boggling 586,817% over the last 48 years.
Whilst these are compelling reasons to invest, there are negatives.
The first is Buffett’s age (83), and that of his business partner Charlie Munger (almost 90). This is leading many to question just how much longer Buffett can remain at the helm of Berkshire Hathaway – as whilst many of his protégées have managed to emulate his success, none have achieved it.
Secondly, Buffett himself has warned the public he cannot generate the returns he used to in previous years because of the huge amounts he needs to now invest.
The bottom line is whilst the stocks are predicted to keep growing, there are several factors which might dissuade the average investor from purchasing stocks – and not least their price.
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