Warren Buffett’s conglomerate Berkshire Hathawayof The filing of the 13F Q2 2020 dossier in August revealed that the Oracle of Omaha had made some big decisions with its investment portfolio. I will particularly focus on Buffett’s Canadian investments which were revealed in the 13F file.
Warren Buffett bought an additional five million shares of Suncor Energy to increase its position in the Canadian energy giant. The filing also revealed that Buffett sold his entire stake in Restaurant Brands International. Finally, the Oracle of Omaha made the surprising decision to invest heavily in Barrick Gold (TSX: ABX) (NYSE: GOLD).
Buffett bought gold!
While all three moves surprised investors, Buffett’s decision to bet on gold was the most confusing for investors who have been following his investment career closely. For those in the know, Warren Buffett has enjoyed great success throughout his decades-long career without resorting to the rare yellow metal.
He has had a negative impression of gold for as long as history can remember. Buffett believes that gold has no real value beyond the jewelry industry. Until he bought shares of Barrick, Buffett had never invested in gold or mining companies.
However, gold is highly regarded as a safe haven asset around the world. It seems the legendary investor has let go of his disdain for gold because it was the most practical decision to make. Buffett may be expecting a major stock market crash, and betting on gold is ideal for making the most of the situation.
An investment in solid gold
So far, his investment seems to be paying off for the Oracle of Omaha. Gold prices have exploded due to the turmoil in the stock markets. Stock valuations of gold miners are hitting higher highs and Barrick Gold is outperforming the prices of gold and other gold mining stocks.
Many believe that gold can still continue to rally. Rising gold prices will likely boost gold miners’ profits for several quarters. Barrick Gold reported an astounding adjusted profit of $ 726 million in the prior quarter, up 78% year-over-year. The gold miner exceeded analysts’ expectations by 25%.
Barrick is one of the world’s largest gold miners. It also has one of the most efficient gold mining operations in the industry. It makes sense that Warren Buffett decided to invest in the stock. He still may not like the rare yellow metal that makes Barrick’s profits. However, Barrick’s fundamentals are strong and its strong balance sheet makes it an attractive investment in these difficult times.
It is clear that Warren Buffett has a bullish stance on gold and gold miners right now. However, it is necessary to remember that gold prices are a major factor when it comes to investing in gold stocks. Playing commodities can be risky when unpredictable variables are involved. Gold prices could increase in value if another stock market crash occurs, but it could decrease if the situation improves.
A drastic drop in gold prices to mid-cycle levels could leave Barrick Gold investors with big losses. At nearly US $ 2,000 an ounce, many gold bears believe that gold prices are currently unsustainable.
If there is a positive development with the global pandemic, it could improve the economy as a whole. The result could be lower prices.
Warren Buffett’s investment in Barrick undoubtedly inspires investor confidence in the performance of gold and gold miners like Barrick. However, I would advise you to be cautious about how much you invest if you choose to follow the Oracle of Omaha.
Silly contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares and recommends Berkshire Hathaway (B shares). The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC and recommends the following options: January 2021 long calls at $ 200 on Berkshire Hathaway (B shares), short January 2021 put options of $ 200 on Berkshire Hathaway (B shares) and short calls December 2020 at $ 210 on Berkshire Hathaway (B Shares).