2 Warren Buffett Stocks to Buy Hand Over Fist in 2026 and 1 to Avoid

DaVita reported better-than-expected quarterly results and issued 2026 EPS guidance of $13.60–$15, sending the stock up over 30% and implying roughly 9x forward earnings versus a historical 13–14x multiple. Berkshire Hathaway’s 27% stake in Kraft Heinz (~$7.5bn) has lost value and may be partially sold, but Kraft Heinz trades near ~9x forward earnings and plans a two-way split that management says could unlock value. UnitedHealth, where Berkshire bought 5M shares last year, fell from about $350 to $280 after lower-than-expected Medicare Advantage payment updates and now trades near 16x forward earnings, with the article warning potential for further multiple compression.

Analysis

Market structure: DaVita (DVA) is the primary beneficiary of the earnings surprise — stabilization of EPS guidance ($13.60–$15) implies near-term cash-flow resilience and gives room for multiple expansion from ~9x to historical 13–14x (implies ~+44% upside if re-rating occurs over 6–12 months). Kraft Heinz (KHC) faces supply-side pressure if Berkshire monetizes ~27% stake, but the announced split can re-price faster-growth assets; packaged-food peers historically re-rated post-separation (Kellanova example). UnitedHealth (UNH) is the direct loser: Medicare Advantage CMS guidance revisions reduce forward growth visibility and leave room for further multiple compression from ~16x.

Risk assessment: Key tail risks are regulatory shocks (CMS MA cuts >2–4% further, dialysis reimbursement policy changes) and Berkshire forced selling of KHC creating a transient liquidity glut; both could materialize in 30–180 days. Hidden dependencies: DVA earnings hinge on Medicare reimbursement, labor costs, and contract renewals with large payors (Fresenius competitive responses could compress pricing). Catalysts to monitor near-term: CMS final rate notices (next 30–90 days), Berkshire 13F/10-K moves, and KHC separation timeline (likely within 6–12 months).

Trade implications: Direct actionable plays are long DVA for multiple expansion (6–12 month horizon), tactically short UNH to express MA-growth disappointment, and opportunistic long KHC on >8–12% post-sale weakness ahead of asset separation. Options trades: buy 6-month UNH puts or 1x2 put spreads to hedge downside while selling calls against existing UNH exposure; consider DVA call spreads to lower cost of entry. Rebalance healthcare exposure toward idiosyncratic ops (DVA) and away from macro-exposed managed-care (UNH) over 3–9 months.

Contrarian angles: Consensus underestimates the speed of DVA multiple recovery if guidance holds and payor contracts renew — a sustained EPS midpoint ≥$14 should compress downside risk and invite 12–14x valuation. Conversely, the market may be underpricing near-term supply risk in KHC if Berkshire dumps stock; that creates a 3–6 month tactical volatility arbitrage. Historical parallels: Kellogg split shows separations can unlock buyer interest within 12–24 months, but outcomes vary if operational improvements don’t follow. Watch for unintended consequences: accelerated KHC selling could delay separation benefits or trigger activist interference.

Key Decisions for Investors

• Establish a 2–3% long position in DVA within the next 5 trading days; add up to +1% on pullbacks ≤10% from current post-earnings level. Target exit when forward multiple reaches 13x (implies ~44% upside from 9x) or if 2026 EPS guidance is revised below $13.60; set a hard stop-loss at -15% from entry.
• Implement a directional pair trade: long DVA (2% notional) vs short UNH (1.5% notional) over a 3–9 month horizon to express idiosyncratic outperformance of dialysis vs managed care. Trim/cover if UNH trades below 0.8x sector beta-adjusted expectation or if CMS reverses MA cuts within 60 days.
• Purchase a 6-month UNH downside hedge: buy 1x 280-strike put and sell 2x 240-strike puts (1:2 put spread) sized to cap cost while profiting from further MA-related weakness; close if implied volatility >45% or UNH guidance is restored to prior levels.
• Set a conditional 1–2% opportunistic buy order in KHC to trigger only if shares drop ≥8% on Berkshire stake-sale headlines; thesis: buyable volatility ahead of planned separation with 12-month target to re-rate toward 12x forward. Exit if management cancels split or if Berkshire signals block sale >25% of its position.