The Oracle of Omaha, Warren Buffett, is arguably one of the most famous investors of all time. Many investors have sought to replicate his investing strategy as emphasized by the holdings of Buffett's multinational conglomerate Berkshire Hathaway.
It's important to carefully evaluate any stock you're considering to ensure it's a solid pick for your portfolio, aligns with your risk-tolerance level, and fits with the overall objectives you've set for your holdings. That said, adding businesses favored by respected and successful investors like Warren Buffett can be a great way to boost your returns while growing your basket of stocks with time.
Here are two such Warren Buffett stocks to consider adding to your buy basket right now.
DaVita's flagship dialysis business serves a wide variety of needs affecting kidney disease patients, including those who need acute hospital care or can receive dialysis at home. As the top provider of home dialysis in the U.S., DaVita has a broad addressable market opportunity based on a durable healthcare need.
It's estimated that approximately 68% of patients in the U.S. with the chronic kidney disease end-stage renal disease require dialysis. That's a patient population of close to 1 million and growing. According to the National Kidney Foundation, over 2 million people worldwide currently receive treatment with dialysis or a kidney transplant to stay alive, with dialysis being the much more common solution.
DaVita operates a network of dialysis centers around the world. The company serves hundreds of thousands of patients a year at its roughly 3,042 outpatient dialysis centers. Less than 400 of those centers are located outside the U.S. DaVita's ability to grow its revenue and profits is heavily tied to the number of dialysis treatments it performs and payer reimbursement rates. The more treatments it facilitates, the more money it makes.
However, the primary source of its revenue and profits are government health insurance programs like Medicare and Medicaid, along with commercial payers covering costs for insureds receiving dialysis. DaVita's business benefits from the fact that it serves a consistent healthcare need that is broadly covered by payers. For example, patients on Medicare have 80% of dialysis treatment costs covered.
Let's take a quick look at DaVita's financials. In the first nine months of 2024, DaVita reported total revenue of $9.5 billion, up 6% from the year-ago period. Of that total, $9.1 billion was derived from dialysis patient services revenues, with roughly $380 million coming from other revenues. Net income from the nine-month period totaled $677 million, up 25% from one year ago.
DaVita is also a cash-flow machine. In the 12 months ended on Sep. 30, 2024, DaVita brought in $1.96 billion in operating cash flow, and $1.14 billion in free cash flow. While this stock may not be the most thrilling for some investors, it's often those durable business serving essential needs that maintain resilient profits and cash flow.
Shares of the stock are up about 120% over the trailing-five-year period, with roughly half of that growth occurring in the past 12 months. For investors searching for a healthcare business to buy and hold for the long term, DaVita could be a solid addition to your basket of stocks.
Chubb (NYSE: CB) comprises about 2.5% of the Berkshire Hathaway portfolio, according to the most recent 13F, representing a 6.7% stake in this insurance business. Buffett has always favored the durability of insurance stocks for the Berkshire Hathaway portfolio, and Chubb is no exception.
Chubb operates in dozens of countries worldwide, including the U.S. The company is one of the top providers of commercial insurance products domestically, with a business history that stretches all the way back to the 19th century. Chubb's insurance offerings are targeted toward both individual consumers as well as businesses.
These offerings include property and casualty insurance, reinsurance, life insurance, personal accident, and supplemental health insurance. Chubb sells specialized insurance products tailored to the needs of healthcare organizations, financial institutions, and other firms too. It also sells personal auto and homeowners insurance.
Like other insurance companies, Chubb makes most of its money from premiums it collects from individual and business customers for the various insurance policies it sells. Chubb also invests part of its premiums in sources like stocks and bonds.
Those investments generate additional profits from investment returns alongside the profits derived from the premiums it charges. The majority of Chubb's revenue and profits are derived from selling property and casualty insurance, with life insurance being the second largest growth driver for the business.
In the third quarter of 2024, Chubb reported consolidated net premiums of $13.8 billion, up 6.6% on a constant currency basis from one year ago. Global property/casualty and life insurance net premiums rose 8.5% and 10.6%, respectively, on a constant currency basis.
Chubb reported that third-quarter net income was $2.32 billion, up 13.8% year-over-year. For the first nine months of 2024, net income hit a record $6.7 billion up 16.9% from one year ago. Q3 operating cash flow hit $4.3 billion.
The insurer has an impressive history of returning its profits and cash to shareholders through dividends. It has raised its dividend every year for 16 years in a row at this point, with its yield coming in around 1.3%. That is roughly in line with what the average dividend stock trading on the S&P 500 pays. Income-seeking investors looking to put cash into a tried-and-true insurance business might want to take a long second look at this top stock.
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*Stock Advisor returns as of January 27, 2025
Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
2 Warren Buffett Stocks to Buy Without Hesitation If You Have $1,000 to Invest Right Now was originally published by The Motley Fool
