When value investor Warren Buffett of Berkshire Hathaway backs a stock, it's hard to ignore.

One such company that has caught his fancy is DaVita HealthCare Partners  (DVA - Get Report) , a dominant player in the U.S. dialysis market providing kidney care.

The stock is currently trading at $69.57 close to its 52-week lows of $67.34. But is this reason enough to jump at the stock?

DVA Chart DVA data by YCharts

As you adjust your portfolio for 2016, it pays to follow the investment lead of Warren Buffett, who is now worth more than $62 billion. We find out why Buffett likes DaVita so much.

Strong Growth Prospects

For specialized health services such as DVA, there is immense untapped potential in the target market. The growing elderly population in the U.S. and elsewhere is a demand trigger for its dialysis centers.

By 2050, 83.7 million people in the U.S. are expected to be 65 years and over, which is nearly double the estimated 43.1 million in 2012. That's good news for an entire class of stocks that are set to exploit these and other multi-year trends.

There will be explosive health care service demand from this group which DaVita is poised to cater to. DaVita boasts 2,329 outpatient dialysis centers, of which 2,225 centers are located in the U.S. with the remaining 104 centers located in ten other nations.

Already, these centers have helped DaVita log in a three-year average revenue growth of 23.9% versus 9.6% by the industry. Net income growth (three-year average) at 14.8% has been miles ahead of the anemic 2.6% churned out by industry.

Where Buffett's Investment Stands

The Oracle of Omaha, through his company Berkshire Hathaway, owns a 17.9% stake in the Fortune 500 company. However, there will only be limited ability to increase his stake, because Berkshire signed an agreement in 2013 with DaVita stating that it would acquire no more than 25% of the company in open-market purchases.

The stock may be down over 8% year-to-date (YTD), but Buffett has still made money on it. How? While Berkshire started building a stake in the company since 2012, a majority of the stock was bought between $30 and $49. So despite coming off 52-week highs of $85.17, Buffett is still in a comfortable position.

Dividends and Buybacks

DaVita has never paid cash dividends in the past which makes one wonder how the company fell in Buffett's basket, considering his love for dividends. However, DaVita aims to provide value to its shareholders through its aggressive buyback programs. In a clear indication that management believes the stock was undervalued during the nine months ended September 30, 2015, the company repurchased common stock worth $425 million, for an average price of $75.53 per share.

With the current market price well below the repurchase price, it might be a good idea to pick up shares of DaVita now.

As with any other company, DaVita too has its set of concerns, which have likely sent it to 52-week lows. JPMorgan Chase recently listed DaVita as one of the stocks at risk when the Fed raises rates owing to its high variable-rate debt as a percentage of market cap. However, with the December rate hike largely priced in and future rate hikes contingent on several macro-economic factors, investors need not worry.

Another concern is that the 2016 Medicare Advantage (MA) benchmark payment rates by the Centers for Medicare and Medicaid Services (CMS) would likely reduce the firm's Medicare Advantage rates by more than 2%. This would negatively impact its 2016 operating income of more than $50 million.

The health care services provider is already taking steps to contain its leverage ratio (trailing 12-months, or TTM), which is now down to 2.66 in the quarter ended September from 2.79 in the same quarter a year ago. In the Health Care Facilities industry, DaVita has the lowest TTM leverage ratio.

The Road Ahead

Analysts, however, expect upside to the stock from current levels. The 10 analysts providing 12-month price targets for DVA have a median target of $82, representing a more than 18% from current prices.

Trading at about 17.05 times forward earnings, DVA comes cheaper than peers Fresenius Medical Care AG & Co. KGAA at 19.74-times earnings and Acadia Healthcare Co. at 22.67-times earnings.

With attractive valuations and strong future potential, it's only a matter of time before DaVita resumes its upward journey, making it a good idea to catch the stock on its way up.

As investors get ready for a new year, which stocks should you buy or sell? We suggest you take your cue from the greatest investor of all time, Warren Buffett. To learn exactly what Buffett is buying and selling for 2016, download a copy of our free report.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.