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Buffett’s Berkshire Hathaway Raises Stake in DaVita (BRK.A, DVA)

Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK.A) bought another 639,200 shares of dialysis provider, DaVita HealthCare Partners Inc. (NYSE: DVA), last week. Buffett’s Company raised its stake after DaVita’s stocks fell sharply amid concerns over change in federal healthcare policy which can substantially reduce Medicare payments.

In its regulatory filing( last Friday), Warren Buffett’s Berkshire Hathaway said to the Securities and Exchange Board (SEC) that it now holds a total of 15.6 million shares of the Denver based company, raising its stake to 14.8%. According to FactSet Berkshire holdings is now estimated at $1.8 billion.

However, Berkshire Hathaway has agreed not it raise its stake in DaVita for more than 25%, except both companies are in an agreement.

DaVita operates about 2,000 dialysis and administrative services centers in the United States.

Berkshire has been gradually increasing its stake in DaVita for last two years. At the end of 2011, Berkshire reported that it owned 2.7 million DaVita shares.

DaVita shares came under pressure last week after Washington proposed 9.4% cuts on Medicare and Medicaid Services. Before this, the stock was up about 10% since the start of this year, amid expectations that the coverage of millions of uninsured Americans will help driving up the revenue of healthcare services providers.

Still,   a final decision on Medicare rates are not expected before October and any cuts in rates will be implemented gradually (phased manner). Regardless of how deep are these cuts, the decision to slash Medicare, Medicaid budget will definitely impact DaVita’s top line. At present, the Company provides and dialysis and related administrative services to nearly 156,000 patients, suffering from kidney failures and renal disease.

Last week, Raymond James analysts downgraded the shares to “market perform” after the news emerged that the sequestration could severely put pressure on DaVita’s revenue.

However, DaVita’s shares could rebound in the near term; given the fact that many fund managers and investors tend to replicate Berkshire Hathaway’s moves.

Shares of DaVita which edged up 0.6% on Friday, gained another 2.03% on Monday on the news that Berkshire Hathaway raised its holdings.


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