Warren Buffett is a raging bull on these 2 Canadian gems
Warren Buffett recently ventured outside the US market in search of valuable opportunities that most other investors may have slept on. When it comes to Buffett’s search for value, he knows no boundaries.
Whether it’s stocks under the Japanese radar “sogo shosha” (companies that trade in a variety of commodities and commodities) or Canadian names that include figures like the heavily battered Alberta energy kingpin. Suncor Energy (TSX: SU) (NYSE: SU) and Premium Hedging Against Inflation (and Volatility) Barrel gold (TSX: ABX) (NYSE: GOLD), it’s clear that Buffett is more than willing to wander outside the United States if he spots a good deal that falls within his circle of expertise.
This coin will focus on his two Canadian bets at Suncor and Barrick to determine which, if any, is worth betting at today’s prices. Without further ado, let’s get right into it.
Warren Buffett chooses number one: Suncor Energy
Suncor is Warren Buffett’s favorite way to play in the Alberta tar sands. He’s been in and out of the name in the past. After the coronavirus crisis decimated the energy sector, Warren Buffett was not afraid to go against the grain by recovering stocks at an even deeper haircut.
It’s not very often that Canadian investors have the opportunity to get a better cost base than Warren Buffett’s. Suncor faces an unprecedented hailstorm in the oil field. While headwinds are strong in the face of a potential second wave and another pullback in oil prices, I think stocks are severely oversold at this point. Yes, there is some serious negative momentum here, but if you have a long-term time horizon it is always heartwarming to have Warren Buffett around your corner.
While I see few, if any, catalysts to propel Suncor out of its funk, the stock remains one of the cheapest 5% on the market with almost 30% off book value. While oil may continue to come under pressure over the next year or so, depending on the severity of this pandemic, I’m willing to bet Suncor will be much higher in three years, as we come out of this crisis and demand for fuel seems to normalize.
Warren Buffett is not the man to play short-term movements in commodity prices. Its aim is to buy cheap stocks that preferably have strong balance sheets, promising long-term fundamentals and relatively wide safety margins. With Suncor, investors have everything to gain.
Warren Buffett chooses number two: Barrick Gold
Warren Buffett likes to go against the grain with value stocks that people have given up on. He’ll gladly seek out the best company in a stinky industry (like with Suncor). In Barrick’s case, however, the man paid a premium for Barrick as gold prices were at the high end of their historical price range. Barrick is the “gold standard” when it comes to gold miners. Although the price of admission to the name is high, compared to the hectic market environment, the high price is worth paying.
The US Fed has been holding firm with interest rates for the past few years. If he has to let inflation run, he will. Given the risk of soaring inflation, gold is the perfect place to hide. If Suncor is the best player on a smelly team, Barrick is the best player on an all-star team. Even though Barrick shares could crash if gold prices returned to mid-cycle levels around US $ 1,300, I would bet that gold is more likely to climb to $ 2,500. , given the unprecedented volatility, interest rates close to zero and growth rate of inflation.
I’m a big fan of Warren Buffett’s Canadian holdings at these levels. If you can grab Barrick on a short-term pullback, I would look to back the truck, as the name has many advantages in this pandemic environment as well as a 1.1% return that I consider a ” bonus’ on top of the benefits of investing in gold.
With Suncor in his mid teens, I think the name is a must buy right now as it flirts with its March lows.
The Warren Buffett Is a Raging Bull post on These 2 Canadian Gems first appeared on The Motley Fool Canada.
Foolish contributor Joey frenette has no position in any of the stocks mentioned.
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