Warren Buffett is hands-down one of the greatest investors of all-time. Many investors, myself included, follow what the Oracle of Omaha does in his portfolio. For Canadian investors, we tend to focus on Buffett’s Canadian picks.
In this article, I’m going to cover one of his most recent purchases.
Barrick Gold a winner
Barrick Gold (TSX:ABX)(NYSE:GOLD) is the most recent Canadian portfolio add-on for Mr. Buffett. Berkshire Hathaway’s (NYSE:BRK.A) CEO added a significant position in the Canadian gold miner in Q2 of this year.
Buffett did sell over 40% of his stake through Q3, leading some to suggest this position may be unwinding. Perhaps the momentum in the precious metals space has run out of steam? Or are investors focused more on the low yields gold producers provide? Or maybe the high levels of commodity exposure?
Precious metals not the hedge they used to be…
Risks in precious metals investing as a form of hedging have materialized in recent years. Some have speculated that Bitcoin and other cryptocurrencies have simply taken the mantle from gold and precious metals. Others have indicated that the unproductive nature of gold as an asset class makes this an asset not suitable for investment.
This is what makes the Buffett purchase of Barrick so interesting. Mr. Buffett has been a staunch believer in investing in unhedged equities. His view on gold over the years is that a business that earns money every quarter is much more appealing than a metal that just sits there. Gold in and of itself does not pay dividends, and costs money to hold.
What does Barrick bring to the table?
That said, gold miners like Barrick do offer a productive service, bringing more gold to the market. Gold demand has risen as a way to hedge portfolios and store value over long periods of time. Accordingly, Barrick’s portfolio of mining assets (active and prospective) has provided investors with a way to buy long-term gold production.
Gold mines have a life span, and companies like Barrick have decades of reserves to maintain sky-high levels of production.
Barrick has also provided a reasonable (and growing) dividend income stream to long-term investors. The company has raised its dividend three times this year, an impressive move. The company’s forward dividend yield is above 1.5%, three times better than long government bonds. This certainly seems like an attractive option for investors looking for a safe place to hide amid rampant volatility.
Barrick Gold has everything investors looking to minimize volatility want. This is a great long-term option for investors with a long-term investment time horizon. I would highly encourage all Foolish readers to consider following Warren Buffett’s lead in picking up shares of this Canadian gem.
Here are other great options for Canadian investors…
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Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: short January 2021 $200 puts on Berkshire Hathaway (B shares) and long January 2021 $200 calls on Berkshire Hathaway (B shares).
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