We recently compiled a list of the 12 best long-term stocks to buy according to Warren Buffett. In this article, we are going to take a look at where DaVita Inc. (NYSE:DVA) stands against the other long-term stocks to buy according to Warren Buffett.
Warren Buffett, the most famous investor on Wall Street, needs no introduction, having generated billions of dollars for himself and investors for decades. Throughout his investment career that began in 1965, the ‘Oracle of Omaha’ has averaged annual returns of 19.8%, trumping a gain of 9.9% for the S&P 500 over the same period.
The market-beating performance has propelled Buffett to the top of the charts as one of Wall Street’s most revered and followed investors. His investment portfolio is always tracked as investors scan for potential market opportunities.
READ ALSO: 10 Best Debt-Free Penny Stocks to Buy Now and 10 Best Counter Cyclical and Defensive Stocks to Invest In.
Likewise, Buffett is one of the most successful investors in Wall Street’s history, having accumulated a fortune of $138 billion. His total assets might have been significantly higher if he hadn’t donated large sums to different charitable causes.
Market participants have always applauded his disciplined approach, which entails a long-term perspective. His investment firm has become the latest company to cross the $1 trillion mark on market cap, underlining Buffett’s impressive stock-picking skills. According to Cathy Seifert, Berkshire analyst at CFRA Research, the $1 trillion milestone is a testament to Buffet’s investment firm’s financial strength and franchise value.
Buffett’s investment strategy has remained constant throughout his career, focusing on the concept of value investing. The strategy focuses on identifying companies that are undervalued but have the potential to increase in value over time. Buffett seeks out companies with a lasting edge over competitors, like a well-established brand, high barriers to entry, and a large and loyal customer base, and he buys into them at a price that ensures a safety margin.
Likewise, the billionaire investor is well-known for his cautious stance on investing in high-risk, high-reward sectors like technology. Instead, he prefers to invest in more stable sectors such as retail, insurance, and finance. He is recognized for his commitment to long-term investments, holding onto companies for extended periods, and steering clear of frequent trading. This strategy enables him to benefit from the compound interest effect and allows the companies he invests in to mature and produce significant profits.
Buffett’s cautious approach is evidenced by the fact that his investment firm had over $180 billion in cash as of the end of the first quarter. The cash reserves were expected to swell to over $270 billion as of the end of June.
The cash reserves have been building up as the billionaire investor only invests in finding attractive deals with eye-popping returns. In a 2023 letter to shareholders, Buffett reiterated he did not see the possibility of eye-popping performance.
Buffett has consistently included dividend stocks in his portfolio, which is a strategy that has effectively generated consistent passive income. This year alone, his investments are projected to generate around $6 billion in dividend earnings.
Nevertheless, Buffett has also been in defensive mode in recent months, opting to reduce stakes in some companies. He has trimmed holdings by up to half in some tech giants, concerned by valuations getting out of hand after a year of gains fuelled by the artificial intelligence frenzy.
While valuations have gotten out of hand going by the blockbuster gains over the past year, there are still opportunities to unlock. With the US Federal Reserve poised to end its monetary easing spree with a cut of interest rates, equity is poised to receive a significant boost.
The best long-term stocks to buy, according to Warren Buffett, are companies well poised to benefit from interest rates dropping. Low interest rates make it easier for companies to access cheap capital to accelerate their operations, generating more shareholder value.
Our Methodology
To compile our selection of the best long-term stocks to buy according to Warren Buffett, we began by analyzing Berkshire Hathaway’s 13F portfolio and chose to highlight the stock holdings that have remained within the portfolio for at least 5 years. Next, we assessed the number of hedge fund investors associated with each stock, as of the end of the second quarter of this year. Finally, the stocks were ranked in ascending order based on the value of Warren Buffett stakes in the companies.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Clinical laboratory technicians running tests in the comprehensive kidney care services.
DaVita Inc. (NYSE:DVA)
Warren Buffett’s First Major Purchase: 2011
Berkshire Hathaway’s Latest Investment Stake: $5 Billion
Number of Hedge Funds Holding Stakes as of Q2: 34
DaVita Inc. (NYSE:DVA) is one of Warren Buffett’s top investment plays in the healthcare sector. The company offers kidney dialysis, outpatient, hospital inpatient, and home-based hemodialysis services. It also operates clinical laboratories that provide routine laboratory tests for dialysis.
The company’s stock value rally over the past year can be linked to its strong performance in dialysis and associated laboratory services. The positive outlook, driven by a strong start to 2024 and significant business prospects, is anticipated to add to this trend.
DaVita Inc. (NYSE:DVA)’s worldwide market presence is consistently growing. This past year, the firm reached a deal to broaden its international activities into Brazil, Colombia, Chile, and Ecuador and extend its operations globally.
DaVita Inc. (NYSE:DVA) concluded the second quarter of 2024 with results surpassing expectations. The company’s total revenue increased to $3.2 billion, and profit margins were positive. The launch of dialysis facilities across the United States and the acquisition of facilities abroad were seen as positive developments.
The company has also raised its forecasts for its financial year 2024, affirming the underlying growth. The estimated earnings per share (EPS) for the entire year are expected to fall between $9.25 and $10.05, an increase from the earlier range of $9 to $9.80. While the stock does not offer dividends, it trades at a discount with a price-to-earnings multiple of 14.
Insider Monkey dug through 912 hedge fund portfolios for their second quarter of 2024 shareholdings and found 34 DaVita Inc. (NYSE:DVA) investors. Warren Buffett’s Berkshire Hathaway was the biggest shareholder through its $5 billion investment.
Here is what Ariel Global Fund said about DaVita Inc. (NYSE:DVA) in its first quarter 2024 investor letter:
“Leading provider of dialysis services, DaVita Inc. (NYSE:DVA) outperformed during the period following a top- and bottom-line earnings beat. DaVita is benefitting from cost saving initiatives, early signs of a normalization in patient growth trends on par with pre-pandemic levels, improved leverage and an aggressive share buyback program. The company also recently announced an expansion of its international operations in Latin America, presenting an attractive long-term growth opportunity. Furthermore, management provided a 2024 financial outlook which is well above consensus and anticipates favorable growth. In our view, we believe the market misunderstands the long-term clinical impact of glucagon-like-peptide-1 (GLP-1s) on dialysis and as such, DaVita currently trades at a significant discount relative to our estimate of its intrinsic value.”
Overall DVA ranks 7th on our list of the best long-term stocks to buy according to Warren Buffett. While we acknowledge the potential of DVA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DVA, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
