Warren Buffett: I would follow him in this defensive industry
Warren Buffett invested until 2020 with caution. With the page turned in 2021, and with the stock market continuing to climb to new highs, I don’t think he’ll be in a rush to put Berkshire Hathaway mountain of money to work anytime soon. Having said that, I wouldn’t expect the man to be inactive either. During the year 2020, we saw Warren Buffett strategically place bets on good old-fashioned value stocks, many of which were in defensive areas of the market.
Warren Buffett made some remarkable and mind-blowing bets in 2020, and they shouldn’t be ignored
Some of Warren Buffett’s most surprising moves, I believe, have been his bets on Japanese “sogo shosha” companies, which are Japanese trading companies essential to the health of the Japanese economy.
Unlike Canada, Japan is not rich in natural resources such as oil, natural gas, iron or other products essential to the health of an economy. As a result, Japanese sogo shosha companies are absolutely vital and they look pretty cheap, at least in the eyes of Warren Buffett, who is more than willing to invest outside of the United States if he sees an opportunity to acquire shares. shares of a company at a discount. to its intrinsic value.
No one would have seen Warren Buffett’s investment in such defensive “Steady Eddie” companies before the fact.
Warren Buffett injects a few health stocks into his portfolio
Warren Buffett’s new uptrend in the pharmaceutical scene was also a big surprise last year. The man has spread his bets across a wide range of large-cap companies in the space, including companies like Pfizer, who can be thanked for one of the rare breakthroughs in the safe and effective COVID-19 vaccine.
However, given that Pfizer is a monster, the COVID-19 vaccine is unlikely to be a major driver (sorry for the pun!) For the PFE stock compared to other small businesses that either have COVID treatments. -19, i.e. a safe and effective vaccine will be revealed in early 2021.
When it comes to biotech, it makes a lot of sense to spread your bets, as Warren Buffett did, as it can be difficult to determine which companies will have breakthroughs and which will fail to go through many clinical trials. on the way to FDA approval.
Of course, you can tip the scales in your favor by betting on a wide array of cheap biotech companies with promising pipelines, so that you can benefit from pharmaceutical breakthroughs while effectively dealing with potential disappointments. Better yet, betting on healthcare is a defensive way to get ahead. The sector can help deliver strong returns over time, with less reliance on the state of the economy as a whole. If a company announces breakthrough treatment, you can bet their stock will be a major driver whether or not the bull controls the larger markets.
Should you bet on Canadian biotechnology?
On the TSX, there aren’t that many large cap options. But there is one worth betting on if you want to follow Warren Buffett into a wonderful industry that will ultimately help the world conquer the insidious coronavirus.
Bausch healthcare companies (TSX: BHC) (NYSE: BHC) is a Canadian pharmaceutical company that I think is worth betting on in 2021. It has a portfolio of wonderful assets in eye care, dermatology and skin care. gastronomy. In a previous post, I noted that Bausch stock was a great Canadian way to follow Warren Buffett in the industry, noting that the Bausch + Lomb spin-off was likely to be a huge driver of value. .
The stock has really heated up in recent weeks, but stocks remain within a mile of the country (around 29%) of their early 2020 highs. Since my article was published, Bausch stock has risen closely. by 18% in just over a month. I think there is still plenty of room to run, as investors look to follow in Warren Buffett’s footsteps in the healthcare scene, which offers a unique blend of defense and growth.
At one point in income, BHC shares are much cheaper than many US health care stocks that have caught Warren Buffett’s attention. I would look to munch in a partial position in Bausch today, with the intention of moving to a full position over time.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool service or advisor. We are Motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we’re posting sometimes articles that may not meet recommendations, rankings or other content. .
Silly contributor Joey frenette owns Berkshire Hathaway shares (B shares). Tom gardner owns shares of Bausch Health Companies. The Motley Fool owns stock and recommends Bausch Health Companies and Berkshire Hathaway (B shares) and recommends the following options: January 2021 short options $ 200 on Berkshire Hathaway (B shares) and January 2021 long calls $ 200 on Berkshire Hathaway (B shares).