Warren Buffett, the chairman and a prominent shareholder of the investment group Berkshire Hathaway (BRK.A, BRK.B), is known for his value-investing strategy. The institutional investor has recently surpassed the net worth of Meta Platforms Inc. (FB) founder Mark Zuckerberg.
Banks, energy firms, and other value stocks are performing well this year, which has benefited Buffett, as the Oracle of Omaha’s conglomerate is prone toward investing in such stocks. Over the past year, BRK.A gain of 34.7% has outpaced the broader SPDR S&P 500 ETF Trust (SPY) gains of 17% over the same period.
Therefore, it might be wise to invest in the Berkshire Hathaway holdings AbbVie Inc. (ABBV), Bristol-Myers Squibb Company (BMY), and DaVita Inc. (DVA). Additionally, these companies are in the medical or healthcare industry, which is expected to outperform the broader market.
AbbVie Inc. (ABBV)
ABBV engages in the discovery, development, manufacture, and sale of pharmaceuticals worldwide. The company’s offerings include pharmaceutical products such as autoimmune and intestinal disease therapy, HUMIRA, adult plaque psoriasis treatment, SKYRIZI, and adult rheumatoid arthritis treatment, RINVOQ.
On January 21, ABBV announced that the United States Food and Drug Administration (FDA) had approved SKYRIZI® (risankizumab-rzaa) for the treatment of adults with active psoriatic arthritis (PsA). Earlier on January 14, the company announced the FDA approval of RINVOQ® (upadacitinib) for the treatment of moderate to severe atopic dermatitis. The approvals might prove to be beneficial for the company.
On December 16, ABBV company Allergan Aesthetics announced the acquisition of Soliton, Inc. (SOLY). The acquisition is expected to add to the company’s portfolio of non-invasive body contouring treatments, with a proven treatment for cellulite appearance.
ABBV’s net revenues increased 7.4% year-over-year to $14.89 billion in the fiscal fourth quarter ended December 31. Adjusted earnings after tax improved 13.3% from the prior-year period to $5.92 billion, while adjusted EPS came in at $3.31, up 13.4% from the prior-year quarter.
The consensus EPS estimate of $3.18 for the quarter ending March 2022 indicates a 7.8% year-over-year increase. Likewise, the consensus revenue estimate for the same quarter of $13.72 billion reflects an improvement of 6.1% from the prior-year quarter. Moreover, ABBV has an impressive surprise earnings history as it has topped consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 31.6% to close yesterday’s trading session at $140.73. It has gained 21.1% over the past six months.
ABBV’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ABBV has a B grade for Value, Stability, and Quality. In the 181-stock Medical – Pharmaceuticals industry, it is ranked #7.
In addition to the POWR Rating grades we’ve stated above, one can see ABBV ratings for Growth, Momentum, and Sentiment here.
Bristol-Myers Squibb Company (BMY)
BMY is a developer, licenser, manufacturer, and marketer of biopharmaceutical products worldwide. The company’s offerings include Revlimid, an oral immunomodulatory drug for treating multiple myeloma, among others.
On January 10, biotechnology company BioAtla, Inc. (BCAB) announced that it has entered into a clinical collaboration with BMY to perform clinical trials of separate combination therapies using two of BCAB’s Conditionally Active Biologic Antibody Drug Conjugates with BMY’s offering Opdivo. On the same day, the company announced a research collaboration and license agreement with biotech company Century Therapeutics, Inc. (IPSC) to commercialize the treatments of hematologic malignancies and solid tumors. The collaborations are expected to benefit the company.
On December 13, BMY announced a quarterly dividend of $0.54 per share on the $0.10 par value common stock of the company, which was payable on February 1. The company also declared approval for the repurchase of an additional $15 billion of the company’s common stock. These developments reflect upon its strong financial position and align with its balanced capital allocation strategy.
For the fiscal fourth quarter ended December 31, BMY’s total revenues increased 8.3% year-over-year to $11.99 billion. Non-GAAP net earnings, attributable to BMY, rose 22.2% from the prior-year quarter to $4.07 billion, while non-GAAP EPS improved 25.3% from the same period the prior year to $1.83.
Analysts expect BMY’s EPS to increase 18.4% year-over-year to $2.06 in the fiscal quarter ending March 2022. Likewise, Street expects revenue for the same period to rise 7.3% from the prior-year quarter to $11.88 billion. In addition, BMY has topped consensus EPS estimates in three out of the trailing four quarters, which is impressive.
The stock has gained 7.9% over the past three months and 3.5% over the past month to close yesterday’s trading session at $64.07.
It’s no surprise that BMY has an overall A rating, which translates to Strong Buy in our POWR Rating system. The stock has a Value grade of A, and a Growth and Quality grade of B. BMY is ranked #10 in the Medical – Pharmaceuticals industry. To see the additional POWR Ratings for Momentum, Stability, and Sentiment, click here.
DaVita Inc. (DVA)
DVA operates as a kidney dialysis services provider for patients with chronic kidney failure or end-stage renal disease (ESRD). The company offers outpatient, hospital inpatient, and home-based hemodialysis services and own clinical laboratories.
On January 18, DVA announced the acquisition of transplant software company MedSleuth. The company expects to bolster its efforts to fuel transplant innovation and expand its operative capability.
On December 9, DVA announced that it completely powers its North American operations with renewable energy. The achievement of this goal aligns with DVA’s commitment toward sustainability. The company also announced that it plans to be 100% renewable across its global operations by 2025.
DVA’s revenues increased 0.5% year-over-year to $2.94 billion in the fiscal third quarter ended September 30. Adjusted net income from continuing operations attributable to DVA rose 16.6% from the prior-year quarter to $260 million. Its per-share value came in at $2.36, up 31.1% from the same period last year.
Street EPS estimate of $8.85 for fiscal 2021 indicates a 21.9% year-over-year increase. Likewise, Street revenue estimate of $11.60 billion for the same year reflects an improvement of 0.4% from the prior year. Moreover, DVA has beaten consensus EPS estimates in three out of the trailing four quarters.
DVA’s stock has gained 4.5% over the past three months to close yesterday’s trading session at $109.93.
DVA’s promising prospects are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock has a Value, Stability, and Quality grade of B. In the 88-stock Medical – Services industry, it is ranked #12. Click here to see the additional POWR Ratings for DVA (Growth, Momentum, and Sentiment).
ABBV shares were unchanged in after-hours trading Friday. Year-to-date, ABBV has gained 4.96%, versus a -5.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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