Tracking Warren Buffett’s move is usually a bad idea. Not only will you be hooked on a Buffett bounty, as you are looking to buy stock after Buffett’s follower herd has stepped in before you, but you’ll also be able to sell after the herd once the man reveals. his 13- F deposits from which he left or cut a name. Talk about a blow to the chin!

Just because a stock fits Warren Buffett’s portfolio doesn’t mean it fits yours. On the flip side, just because some investment opportunities (think airlines) aren’t his cup of tea doesn’t mean they can’t be yours, especially if you’re a bold and adventurous investor with a sound, long term thesis and patience to hold.

While following investment gurus like Warren Buffett in or out of names is a terrible idea that won’t translate into superior risk-adjusted returns in the long run, I think it still makes sense to study. Buffett’s movements up and down. perspective to get a gauge of the opportunities (or lack thereof) that Buffett sees in a given market environment.

Recently, Warren Buffett’s bets have been quite conservative by nature, with bets on healthcare companies, gold miners, and Japanese sogo shosha trading companies being some of his most notable bets made in 2020. In this article, we’ll take a look at the actions of the first gold miner. Barrick Gold (TSX: ABX) (NYSE: GOLD), a stock that Warren Buffett’s company has bought and sold in recent quarters.

Warren Buffett buys Barrick Gold then reduces his stake by 40%… What next?

Warren Buffett is a long-term investor, but one can’t help but notice that Berkshire Hathaway holding period on certain investments shrunk considerably last year. Buffett’s foray into airline stocks didn’t last long, as he eliminated his stake amid the coronavirus crash, nor his venture into TSX-listed gold miner Barrick Gold.

While I don’t think it was Warren Buffett’s idea to get into Barrick Gold in the first place, it was rather confusing when Berkshire cut its stake by almost half just a few months after initiating a relatively modest. At the end of the third quarter, Berkshire owns approximately 12 million shares of Barrick Gold.

The decision to ditch such a large share of stocks has proven to be quite smart so far, as the price of gold has continued to decline sharply alongside Barrick Gold stock in the last quarter of 2020. At the time. As of this writing, Barrick Gold is down more than 30% from its high level and gold prices are resuming negative momentum, plunging below US $ 1,800 / oz. mark for the first time in more than two months.

Talk about incredible timing!

While I still believe Barrick Gold is a magnificent investment that can further diversify Berkshire’s portfolio and mitigate potential post-pandemic inflationary risks in this pandemic-plagued environment, I wouldn’t be at all surprised if gold should take a deeper dive before his next leg up.

Deutsche Bank analysts believe gold could undergo a short-term correction that could drag the shiny yellow metal to as low as US $ 1,600 an ounce. Should such a scenario unfold, Barrick, a gold miner who relies on the price of gold, could be heading for an even steeper fall, giving Buffett a more attractive entry point to build his stake. long-term.

Take away idea

I would keep an eye on gold prices and look to refuel Barrick Gold in the first half of this year before any evidence of rapidly rising inflation. Could Warren Buffett consider an even bigger stake after the latest correction? Nobody knows. Either way, if you have the opportunity to get a better cost base than Warren Buffett in a stock, I think it would be wise to take a step.

Silly contributor Joey frenette owns Berkshire Hathaway shares (B shares). The Motley Fool owns shares and recommends Berkshire Hathaway (B shares) and recommends the following options: short March 2021 calls $ 225 on Berkshire Hathaway (B shares), short January 2023 Put $ 200 on Berkshire Hathaway (B shares) and long January 2023 $ 200 calls on Berkshire Hathaway (B shares).