Tags: Chudley | Weschler | Berkshire | DaVita

StreetAuthority's Chudley: Berkshire Gives DaVita HealthCare Seal of Approval

By    |   Friday, 27 December 2013 07:15 AM

Berkshire Hathaway's ownership of DaVita HealthCare Partners helps make it an attractive stock, says Jody Chudley of StreetAuthority.

Ted Weschler, who Berkshire CEO Warren Buffett has put in charge of managing $4 billion for the firm, has devoted almost half that total — or $1.8 billion — to DaVita.

Weschler's ownership of DaVita goes back to 2001, when he was managing the Peninsula Capital Advisors hedge fund, and he continues to buy it quarter after quarter, Chudley writes.

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"The thesis behind the DaVita investment seems to be a play on America's aging population," Chudley explains. DaVita offers kidney dialysis treatment for patients afflicted with chronic kidney failure or end-stage renal disease.

Longer lifespans will raise demand for DaVita services, Chudley notes.

And "what likely really turns this into a high-conviction investment for Weschler is that DaVita basically operates in a duopoly with Fresenius Medical Care." The two companies have cornered about two-thirds of the dialysis market, he adds.

"I likely wouldn't jump into DaVita based on just my own analysis, but with Weschler's stamp of approval, I think I would," he writes.

Morningstar analyst Michael Waterhouse offers a mixed review of the company. "DaVita's dominance in the U.S. dialysis market makes this company a standout provider in the health services industry," he writes on Morningstar.com.

"Nonetheless, DaVita faces significant reimbursement challenges due to the 2 percent Medicare sequester, provider payments tied to quality-of-care metrics, slowing Medicare growth under healthcare reform and recent changes to the dialysis bundle to reflect diminished drug utilization."

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Berkshire Hathaway's ownership of DaVita HealthCare Partners helps make it an attractive stock, says Jody Chudley of StreetAuthority.
Chudley,Weschler,Berkshire,DaVita
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2013-15-27
Friday, 27 December 2013 07:15 AM
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