Why DaVita Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of kidney care company DaVita HealthCare Partners (NYSE: DVA  ) surged 10% today after the company signed a standstill agreement with Warren Buffett's Berkshire Hathaway.

So what: Berkshire agreed not to acquire more than 25% of DaVita after approaching management about increasing its stake, indicating that Buffett is possibly setting the stage to negotiate a friendly takeover. Additionally, Berkshire's interest alone suggests that DaVita is undervalued, giving bargain hounds good reason to start sniffing around the shares.     

Now what: Don't let today's pop prevent you from looking into the stock.

"Berkshire recently approached us about the option of increasing their holdings," DaVita's Chief Legal Officer Kim Rivera said on a conference call with analysts. "We found them to be a supportive investor with a long-term view."

When you couple DaVita's solid fundamentals and still-reasonable P/E with the possibility of a Berkshire takeover, the stock's risk/reward profile seems rather attractive at this point.

Interested in more info DaVita? Add it to your watchlist.


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