Legendary investor Warren Buffett has made his fortune by taking a patient approach to investing. Research shows the billionaire has held around three out of every 10 stocks he’s owned for a decade or more.
Buffett’s Berkshire Hathaway has owned a stake in Coca-Cola for an astonishing 34 years.
By owning shares for the long haul, the so-called Sage of Omaha eliminates the impact of temporary volatility on his returns. And he allows the strong fundamentals of the companies he holds to drive robust capital appreciation.
Spire Healthcare Group (LSE: SPI) is a share I think could deliver exceptional long-term returns. Here I’ll explain why I believe Buffett might even welcome it in his own portfolio.
Private party
Private healthcare provider Spire is a stock I’ve actually bought myself. I’m convinced that profits here will rise as people increasingly seek private medical treatment.
Spire’s revenues jumped 7.1% in the six months to June. The result powered adjusted operating profit 12.6% higher year on year. This was driven by “strong demand for private treatment” that drove such revenues up 21.6%, the company said.
NHS hospital waiting lists continue to grow and hit a new record high of 6.8m patients in England in July, official figures show.
Even if it gets significant extra funding, such waiting lists won’t reduce quickly. The government itself predicted in February that 10m people could turn to the NHS for treatment following the pandemic. And that’s likely to drive more people to the private sector.
Strong growth
This is why City analysts think sales and therefore earnings at Spire will rise sharply. The FTSE 250 firm recorded losses of 7.1p per share last year. And it’s expected to swing to earnings of 4.5p in 2022. Furthermore, in 2023 the business is expected to report earnings of 8.7p.
It’s worth noting that Spire shares trade on a forward P/E ratio of 52.9 times. This sort of high valuation reflects expectations of continued breakneck profits growth. And so signs of more modest growth could cause a sharp share price correction. That’s especially so if some people don’t turn to private healthcare because they have less cash available in a tough economy.
Still, in my opinion the benefits of owning Spire shares outweigh the dangers. The company is the country’s largest private healthcare provider by procedure numbers. Therefore it’s well placed to exploit its market.
A Buffett-like stock
As I said at the top of the piece, Spire carries certain qualities that Warren Buffett is a big fan of. It has a formidable competitive advantage. You see, a rival firm can’t suddenly arrive to set up a network of hospitals.
The company also has highly defensive operations. These, as its first-half results show, can generate profits growth even during economic downturns. Many of Warren Buffett’s holdings, like dialysis provider DaVita and consumer goods maker Kraft Heinz, share the same quality.
Like Buffett, I buy shares with a view to owning them for the long haul. And Spire is one I think could really boost my wealth.