We recently compiled a list of the 10 best performing Warren Buffett stocks in 2024. In this article, we are going to take a look at where DaVita Inc. (NYSE:DVA) stands against the other Top-Performing Warren Buffett Stock of 2024.
Warren Buffett has etched his name as the most successful investor on Wall Street by steering a small company into a trillion-dollar empire. The milestone stems from the billionaire investor’s value investing strategy that has always focused on undervalued stocks with tremendous upside potential.
In a year where the overall market has been on an upward trajectory thanks to solid financial results amid a resilient economy and expectations of interest rate cuts, Buffett has outperformed the overall market. His investment firm gaining more than 28% compared to a 17% gain for the S&P 500 over the same period underscores Buffett’s competitive edge in picking and investing in market-beating stocks.
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Buffett, who rose to prominence in the 1960s, has transformed his investment firm into a conglomerate with stakes in companies in the insurance, railroad, retail, manufacturing, and energy sectors. According to Andrew Kligerman, TD Cowen’s Berkshire analyst, Buffett’s performance in 2024 is a testament to his stock-picking skills focused on businesses trading at relatively lower valuations.
Nevertheless, the billionaire investor has been in defensive mode despite the stellar performance for the better part of 2024. Concerned by valuations getting out of hand amid the high interest rate environment and deteriorating economic conditions, Buffett has dumped massive amounts of stocks in companies whose valuations got out of hand.
With the massive sale of stakes, the billionaire has successfully generated significant value as most of the stocks had gained significantly amid the bull run in the market. The stock sale has also allowed the billionaire investor to raise the cash pile in his investment firm to a record $277 billion.
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Although Buffett has previously argued against diversification, it’s understandable why his firm decided to reduce stakes in some of the companies. The investments had been a huge success for his firm, locking profits with the overall market at all-time highs.
The fact that Buffett invests through a conglomerate structure, often considered archaic, underscores his edge in the highly competitive investment world. At 94, the ‘Oracle of Omaha’ has started showing signs of slowing down. The appointment of Greg Abel as his successor signals he may not have a significant say in investment decisions in the near future.
What might come as a surprise is that the best-performing Warren Buffett stocks in 2024 are not among the big names that account for the biggest share of Buffett’s portfolio. Instead, they are companies that have remained resilient amid the high interest rate environment that has rattled the stock market.
Additionally, they boast of stocks well positioned to benefit as the macroeconomic environment improves, with the US Federal Reserve cutting interest rates by 50 basis points. The US economy is avoiding recession as the Fed continues to tweak its monetary policy, which should allow the companies to generate more shareholder value and, therefore, continue powering high.
Buffett’s investment portfolio also includes companies with tremendous potential and ability to generate free cash flow owing to resilient core businesses. Consequently, the companies have emerged as a source of passive income, allowing Buffett to generate billions of dollars in dividends. Last year alone, the Oracle of Omaha raked $4.36 billion in dividends from his investments.
Our Methodology
We analyzed Berkshire Hathaway’s Q2 2024 portfolio and picked the best-performing stocks on a year-to-date basis, as of September 20. The list is sorted in ascending order of the year-to-date performance of the stocks.
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).
DaVita Inc. (NYSE:DVA)
Warren Buffett’s Q2 2024 Stake: $5 Billion
Year to Date Gain as of September 20: 52.62%
Number of Hedge Fund Investors In Q2 2024: 34
DaVita Inc. (NYSE:DVA) is one of Warren Buffett’s top investments in the healthcare sector, specializing in providing kidney dialysis services. It is one of the best-performing Warren Buffett stocks in 2024, benefiting from solid service demand that has yielded impressive financial results.
DaVita Inc. (NYSE:DVA)’s competitive edge stems from being the major provider of kidney dialysis services across the United States, managing 2,675 locations for outpatient dialysis and an additional 367 sites in 11 different nations. Its consistent approach to business aligns well with Warren Buffett’s investment strategies.
After accruing most of the growth in the US, DaVita Inc. (NYSE:DVA) is expected to grow its global presence further by making strategic acquisitions and aiming to become the leading provider of dialysis services in Latin America.
The company was on a roll in the second quarter, with dialysis treatment increasing 1.1% to $7.265 million. The dialysis provider generated $3.187 billion in revenues and a net income of $223 million or $2.59 a share. It exited the quarter in a solid financial position with $1 billion in free cash flow. The stock is currently trading at a discount with a price-to-earnings multiple of 14.
Insider Monkey reviewed 912 hedge fund portfolios for their Q2 2024 shareholdings and identified 34 investors in DaVita Inc. (NYSE:DVA). The largest shareholder was Warren Buffett’s Berkshire Hathaway, with a $5 billion investment.
Here’s what Ariel Global Fund mentioned about DaVita Inc. (NYSE:DVA) in its Q1 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 3rd on our list of 10 best performing Warren Buffett stocks in 2024. 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.