We’ve concentrated on Change of Heart Buys for the past few weeks. That’s because we feel insiders who know nothing other than sell, sell, sell and suddenly buy during a market route could be an indication the stock is seen as undervalued by executives.
On a side note, this week’s highlighted insider buy is Warren Buffet’s 14th largest holding in Berkshire Hathaway’s holdings. The Oracle of Omaha owns 38.2% of DaVita Inc. (DVA), the largest ownership stake of Berkshire’s holdings; a little more than 36 million shares and 0.9% of the portfolio. (1)
DaVita is a comprehensive kidney care provider. DaVita provides care for patients at every stage and setting along their kidney health journey—from slowing progression of kidney disease to streamlining the transplant process, from acute hospital care to dialysis at home. As of March 31, 2022, DaVita served 200,800 patients at 2,809 outpatient dialysis centers in the U.S. The company operated an additional 346 outpatient dialysis centers in 11 other countries worldwide.
DVA Chief Operating Officer (COO) Michael David Staffieri recently bought 20,000 shares of the kidney care company’s stock at $77.70 for a touch more than $1.5 million. Before his seven-figure outlay, Staffieri exclusively sold the healthcare stock. He unloaded 11 consecutive times cashing out for more than $14 million. (2)
The COO jumped in to buy DaVita after the US Supreme Court ruled against the company in a case versus an Ohio hospital’s health care plan. DaVita claimed the health plan discriminated against end-stage kidney patients with low reimbursement rates to encourage then patients to switch to Medicare. The Supreme Court voted 7-2 against DaVita.
DVA shares got whacked on the news, falling from $90.36 at the start of trading on June 21st and settling at $76.05 to end the day. Staffieri made his move at $77.70 on June 23rd. Meanwhile, Wall Street has a one-year price target of $107.38. (3) Shares are at $83.11 as we type.
Wall Street analysts expect the Denver-based company to earn $10.08 in 2023, up from $7.87 this year. (4). In the last half-decade, DaVita traded with an average price to earnings (P/E) of 15.06, a low of 9.27, and maxed out at 22.69. Today the company is valued at 9.43 times earnings (5) versus 15.46 for its peer group.
Based on 2023’s earnings per share (EPS) forecast and DVA’s recent P/E history, we arrive at the following possible price targets:
- Average P/E: $151.80
- Low P/E: $95.05
- High P/E: $228.72
- Peer P/E: $155.84
Overall: DaVita Inc. (DVA) appears to offer Warren Buffet, COO Michael David Staffieri and shareholders an attractive risk to reward ratio based on its 2023 consensus earnings estimate and five-year P/E history.
With a five-year Beta of 1.14, DVA is slightly more volatile than the S&P 500 (Beta of 1) and is appropriate for investors with an above-average risk tolerance and a time horizon of at least 18 months.
1 – https://www.cnbc.com/berkshire-hathaway-portfolio/
2 – https://www.secform4.com/insider-trading/1604063.htm
3 – https://finance.yahoo.com/quote/DVA?p=DVA
4 – https://finance.yahoo.com/quote/DVA/analysis?p=DVA
5 – https://finance.yahoo.com/quote/DVA/key-statistics?p=DVA