Warren Buffett is one of the greatest investors of our time, but blindly following him or Berkshire Hathaway in and out of stocks after they’ve been publicly disclosed is usually a losing proposition, especially for near-term thinkers who are looking to make a quick buck.
New holdings of Buffett or Berkshire typically get slapped with a “Buffett premium” after the public learns of his or his firm’s investments, so if you’re a buyer after hearing about his new stock pick, odds are, you’d be paying a much higher price than the Oracle paid. It doesn’t matter if you’ve got the “best” business in the world if you overpay for a stock.
Moreover, without a firm understanding of the business under question, you’ll lack conviction and will probably try to guess what Buffett will do next, or worse, wait until Berkshire’s next 13-F filing before making a move. By the time you’re ready to make a move, tonnes of other copycat investors would have already dumped or added to their stakes in the attempts to copy Buffett’s moves.
If you’re a long-term shareholder who’s willing to do your own homework, and you’re not looking to copy Buffett or Berkshire step for step, then there’s no shame at looking at Berkshire’s 13-F filings, because they’re chock-full of clues as to the industry opportunities to draw your attention to. In addition, a Buffett holding can be a confirmation that your investment thesis is sound if you’ve already owned shares or had a particular name under your radar.
As Buffett’s horse for betting on the Albertan oil sands, Suncor’s business, as you’d imagine, is in a league of its own. Not only has Suncor been the king of the oil sands, but the firm has kept its investors relatively protected from the magnitude of volatility that’s been plaguing the industry since the 2014 oil implosion.
Suncor has a healthy balance sheet, excellent integrated operations, and a growing dividend that long-term investors can depend on even in times of industry turmoil. Most importantly, Suncor plans to reward its investors, even as WCS prices remain as depressed as they are over a longer period of time. So, in essence, you’re getting huge upside in the scenario where oil prices rebound, and a decent enough risk/reward trade-off should oil prices continue to remain in limbo for longer.
Suncor is one of the best bets in the oil patch. It’s a great way to play the rebounding of oil prices while hedging your bets, as you’ll still be getting a satisfactory return on your investment should that big oil price pop never end up happening.
You’re getting a nice growing dividend, currently yielding 4.03%, that’s yours to keep regardless of the trajectory of oil prices. And if you can get in at a low enough price (preferably below $40), there’s the potential for big capital gains, especially should the WCS-to-WTI gap narrow at some point over the next few years.
Stay hungry. Stay Foolish.
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Fool contributor Joey Frenette owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of Berkshire Hathaway (B shares).