Warren Buffett, the ‘Oracle of Omaha’, managed to attain a roughly $142 billion net worth by consistently outperforming the markets. The Berkshire Hathaway (NYSE: BRK.B) chief executive officer (CEO) and chairman did so by utilizing a careful, level-headed approach to investing.
The billionaire investor does not chase trends or make short-term trades — instead, he prefers to hold stocks for a long time and focuses on acquiring stakes in high-quality businesses that have some sort of enduring competitive advantage.
Most importantly, Buffett is the preeminent value investor — his primary criterion for judging an equity is whether or not it is trading at an attractive price relative to earnings and revenue estimates.
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Buffett and Berkshire have been net sellers as of late — they’ve been liquidating positions and cutting stakes much more than they’ve been acquiring stocks or expanding holdings.
Finbold’s insider trading radar recently picked up another Buffett sale — this time around, an SEC Form 4 filing reveals that the investor sold millions of dollars worth of DaVita Inc (NYSE: DVA) stock on February 11. Just two days later, on February 13, DaVita held its Q4 2024 earnings call. The quarter saw both earnings per share (EPS) and revenues come in above analyst expectations.
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Warren Buffett cuts stake in dialysis company ahead of earnings
On February 11, the billionaire sold 203,091 DVA shares at an average price of $156.01. The total worth of the transaction was approximately $31,684,226. In addition, the sale was not prearranged, as it was not made according to a 10b5-1 plan.
Following the sale, Berkshire and Warren Buffett continue to hold roughly 35.89 million DaVita shares — a roughly 45% stake in the company.
By press time on February 14, DVA stock was changing hands at a price of $160.65, marking a 7.42% increase on a year-to-date (YTD) basis. After the release of the earnings report, an aggressive round of profit-taking ensued — as DaVita stock was trading at $177.06 a day prior to publication.
So, why did Buffett sell stock in a business that seems to be doing well? One could argue that after the 32.61% rally seen over the course of the last 365 days, DVA stock no longer fits the billionaire’s valuation criteria. However, this line of reasoning doesn’t pan out — the stock is still trading at a modest forward price to earnings (PE) of just 15.74.
The answer is actually quite simple — Berkshire and DaVita have a share repurchase agreement signed back in April of 2004 — which stipulates that Berkshire sells back shares whenever its stake in the company surpasses 45.0%. Therefore, the sale cannot constitute a bearish signal — especially once we consider the extent of Warren Buffett’s remaining position.
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