Today’s recommendation is a fresh face from yesterday’s Cabot Top Ten Trader, which highlights the best momentum investments in the market.
“DaVita, Inc. (DVA) is a leading provider of dialysis services, offered through more than 900 hospitals and more than 1,800 outpatient dialysis centers. Medicare accounts for 58% of revenues, Medicaid 5% and commercial insurance 34%. It’s good steady business, and the company has been able to grow every year of the past decade by acquiring smaller competitors as the industry consolidates.
“Interestingly, DaVita’s growth has not been rapid for years — revenue growth was typically in single digits — but recent quarters have shown a trend of accelerating growth in revenues. More important, though, is the announcement made two months ago (May 21) that DaVita would pay $4.4 billion to acquire California’s HealthCare Partners. This will mark a broadening of the company’s focus, as well as an endorsement of HCP’s business, which since 1992 has focused on improving patients’ quality of life while containing healthcare costs.
Technical Analysis
“In the two months since DaVita’s acquisition announcement, the stock has soared from 80 to 100, but the past three weeks have seen the stock digest those gains, and that’s why DVA is making its appearance here, for the very first time; this pause in the advance provides entry opportunities for new buyers. The stock took a hit today with the market, but this is the first pullback following a strong uptrend—something that’s usually buyable. A stop at 90 looks appropriate. Suggested Buy Range: 94-97. Cabot’s buy range is valid for two weeks.”
- Michael Cintolo, Cabot Top Ten Trader, July 23, 2012