Summary
- The recent sale of DaVita stock by Berkshire Hathaway is not indicative of either Warren Buffett or Ted Weschler souring on the stock.
- It is the second-largest U.S. dialysis provider, with excellent prospects going forward.
- It currently trades at a 30% discount to fair value.
Despite recent disclosures, DaVita (DVA) remains an excellent choice for value investors seeking a cheap stock with excellent growth prospects. This may seem an unwarranted claim at first glance, given that Berkshire Hathaway (BRK.A) (BRK.B), a firm whose chairman is synonymous with value investing, recently sold some DaVita stock. On closer examination, however, this sale does not warrant a bearish disposition toward DaVita.
The sale of 470,000 shares of DaVita stock during Q1 2020, bringing Berkshire's overall stake down to 38,095,570, was a modest trimming - and far from being the only one. In the same quarter, Berkshire sold shares of nineteen stocks in its portfolio.
| Berkshire Holding | Shares Sold In Q1 2020 | Shares Remaining In Portfolio |
| DaVita | 470,000 | 38,095,570 |
| Amazon.com, Inc. (AMZN) | 4,000 | 533,300 |
| Axalta Coating Systems Ltd. (AXTA) | 194,000 | 24,070,000 |
| Biogen Inc. (BIIB) | 5,425 | 643,022 |
| Delta Air Lines, Inc. (DAL) | 976,507 | Sold Out |
| General Motors Company (GM) | 319,000 | 74,681,000 |
| Goldman Sachs Group Inc. (GS) | 10,084,571 | 1,920,180 |
| JPMorgan Chase & Co. (JPM) | 1,800,499 | 57,714,433 |
| Liberty Latin America Ltd. (LILA) | 481,000 | 19,310,000 |
| Liberty Global plc (LBTYA) | 84,062 | 2,630,792 |
| The Liberty SiriusXM Group (LSXMK) | 240,000 | 42,868,070 |
| Phillips 66 (PSX) | 227,436 | Sold Out |
| Sirius XM Holdings Inc. (SIRI) | 3,857,000 | 132,418,729 |
| Suncor Energy Inc. (SU) | 70,000 | 14,949,031 |
| Synchrony Financial (SYF) | 675,000 | 20,128,000 |
| Teva Pharmaceutical Industries Ltd. (TEVA) | 460,000 | 42,789,295 |
| Travelers Companies Inc. (TRV) | 312,379 | Sold Out |
| United Airlines Holdings Inc. (UAL) | 218,966 | Sold Out |
| Verisign, Inc. (VRSN) | 137,132 | 12,815,613 |
Figures collated from 13F-HR SEC filing by Berkshire Hathaway dated 05/15/2020.
Why the trimming? Simply put, the sheer uncertainty that COVID-19 has introduced to the economic landscape. While Berkshire has substantial cash reserves of $137.26 billion - which was $128 billion in the previous quarter - the need to maintain a high cash pile and preserve liquidity seems prudent in the present climate. Hence the moves that Buffett and his lieutenants have made in the most recent quarter. It is in keeping with what Buffett stated in Berkshire's 2019 annual report:
...Berkshire's financial affairs will unfailingly be managed in a manner allowing the company to withstand external shocks of an extreme nature.
It is safe to say at this stage that COVID-19 qualifies as an external shock of an extreme nature, to put it mildly. And that is what makes DaVita's performance all the more remarkable over the course of this crisis, having delivered a 30.96% return on equity over the past twelve months.
