On March 3, 2014 on CNBC’s Squawk Box, Ted Weschler discussed Berkshire’s investment in DaVita Healthcare Partners.
Weschler listed three broad filters he uses for investing in healthcare stocks.
- Does the provider deliver better quality of care than someone could get anywhere else?
- Does the company deliver a net savings to the healthcare system?
- Do you get a high-return on capital, growth and a shareholder friendly management? Presumably, Weschler looks for these same characteristics in other industries.
Weschler began studying the dialysis industry right out of college. Therefore he knows the industry well. The lesson here is to look for insights by studying an industry deeply over a sustained period of time. This echoes lessons from Warren Buffett.
Finally, Weschler is long-term oriented. He has no idea how DaVita will do in the short term (two years out) but he is confident that in five years it will be a more valuable franchise.
The takeaway: a value-oriented rational framework applied consistently over time will deliver (very) satisfactory results.