Buffett’s DaVita Stock Looks Like A Bull Trap
EWM Interactive | Aug 25, 2020 06:32AM ET
Formerly known as DaVita HealthCare Partners, DaVita (NYSE:DVA) provides kidney dialysis services for patients suffering from chronic kidney failure or end stage renal disease. It was founded in 1994 and went public a year later. As of this writing DaVita’s market cap is close to $10.7 billion. The interesting part is that it is a top 10 holding in the Berkshire Hathaway (NYSE:BRKa) portfolio.
As of Q2 2020, Warren Buffett’s company owns over 38 million DaVita shares worth over $3 billion. And while that is not a huge amount for Berkshire, it represents just over 30% ownership interest in the dialysis services provider.
DaVita stock reached a record high of $92.16 a month ago and is still trading close to that level. Can the uptrend continue or is it time for the bears to show up?
DaVita’s weekly chart allows us to put its entire progress since the February 2000 bottom into Elliott Wave perspective. It can be seen as a textbook five-wave impulse. The pattern is labeled (1)-(2)-(3)-(4)-(5) and the five sub-waves of (1) and (3) are also visible.
Unfortunately for the bulls, the theory states that a three-wave correction occurs after every impulse pattern. The support area of wave (4) is typically a reliable bearish target. For DaVita shareholders, this means that once wave (5) is over, a decline to roughly $45 can be expected. Instead of joining the bulls now, investors should be getting ready for a ~50% drop in DaVita’s market value.
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