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DaVita HealthCare Partners (
DVA) remains one of Ted Weschler's favorite stocks in 2013. The portfolio manager added 1.37 million shares of the dialysis center operator to Berkshire Hathaway's portfolio in the first quarter, adding onto his existing stake by 10%. That brings Berkshire's total position in DVA to 14% of outstanding shares.
There's a limit on how much Weschler can buy. Earlier this month, he agreed to limit Berkshire's stake in DaVita to 25%, and limit his shareholder activism in the firm. That news quelled rumors that DVA could be a buyout target for Berkshire, but this quarter's position increase shows that Berkshire's investment team is still bullish on this business.
DaVita runs more than 1,800 clinics and in-patient hospital dialysis units across the U.S. The firm's clinics are unique in that they serve patients who suffer from chronic long-term kidney issues. Typically, the only way around dialysis is a kidney transplant, and demand vastly outstrips supply of transplant organs in this country. That means that DVA's nearly 140,000 patients are likely to stick with its facilities for the long-term. Health care tends to be a sticky business -- barring a major bad experience, patients are likely to stay with their providers -- which makes DVA's revenues consistent and predictable in large part.
The 2012 merger with HealthCare Partners changes DVA's concentration slightly. The new physician management arm now makes up around a quarter of DaVita's revenues. That increased scale justifies the increased share price that investors are paying for DVA. I'd expect Berkshire's buying of DVA to keep on going in 2013.
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