“The best chance to deploy capital is when things are going down.” This particular nugget of wisdom is relevant now more than ever. But this left many wondering why the wizard of Omaha and Berkshire Hathaway didn’t make use of the huge cash pile during the crash. And Berkshire Hathaway’s annual meeting cleared away any speculations about the company making moves behind the scenes.
One of the things that Buffett is still standing by is the American economy. He believes that if investors buy into S&P 500 index fund and keep holding on to it for decades, their investment is likely to outperform treasury securities. For Canadian investors, I believe emulating his previous tried-and-tested investment moves that have already made him a fortune might be the best course of action.
So, if you have been sitting on some cash or have hoarded a cash pile to weather the crash, you may want to put some of it to good use.
An urban workspace REIT
Allied Properties (TSX:AP.UN) is a $5.19 billion REIT that focuses on urban workspaces and urban data centre spaces. Several of the properties owned and managed by the company are class-one workspaces, a particular blend of light industrial property, a modern office, and retail space. This particular real estate type is expected to be the most in-demand real estate once the world shifts gears and starts moving even faster towards the fourth industrial revolution.
The company currently has a portfolio comprising of 160 properties, covering an area of about 11 million sq. ft. The bulk of the properties is concentrated in Toronto and Montreal. Allied Property stock had been growing very steadily since 2016, and its returns were about 75% up until the start of the year. But in the crash, the stock fell down about 28%, and it still hasn’t recovered yet.
With that price tag, you have not only a chance to bag a decent growth stock but also a Dividend Aristocrat.
A stock that’s not on discount
Calian Group (TSX:CGY) is an amazing growth stock, that crashed about 25% in March but has already recovered. Calian is a consulting firm that works with hundreds of companies in several different sectors, including defence, IT, communication, media, energy, and health. The company is divided into several different divisions, each with its own clientele.
When it comes to dividends, Calian has a decent enough yield of 2.49%, but it doesn’t increase its dividends. Or at least, it hasn’t increased them since 2015. But it’s a very desirable growth stock. Its five-year returns are about 190%, and the CAGR is 23.79%. At this pace, it can turn your $20,000 cash in an RRSP into about $169,000 in just a decade. Not to mention the consistent dividend payouts.
Even if the stock is currently not on discount, it might deserve a place in your portfolio, especially since it can accelerate its growth. Otherwise, you may wait for another market downturn to buy this stock.
One of the key tenets of Warren Buffett’s investment strategy is buying good businesses. Therefore, even when you are emulating his other investing practices, like buying during a market crash, you should always consider the underlying business first. You shouldn’t buy a stock simply because it looks like a good deal in a crash. You should evaluate a company based on its fundamentals and future prospects, no matter the valuation.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Calian Group Ltd and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares).