When the worst financial crisis in over a decade hit due to the COVID-19 pandemic, investors were on the hunt for guidance. Warren Buffett was one of the biggest success stories to come out of the previous crisis. Because of this, many were anxious to see what moves he and his firm would make in the COVID-19 era. However, beyond a bet and subsequent retreat in the airline industry, Buffett remained subdued.
In early May, I’d suggested that investors should jump into value targets that were likely to rebound after this crisis. This include sectors like hospitality, the restaurant space, and energy. In previous cycles, Buffett had made bets on struggling companies like Home Capital that then went on to flourish in a relatively short period of time. Fortunately, the anticipation over Buffett’s next big bet has come to an end.
Warren Buffett finally makes a big move
Berkshire Hathaway announced a $9.7 billion deal for Dominion Energy at the end of the United States holiday weekend. Warren Buffett had struck a cautious tone for the entirety of the spring. However, this bet on Dominion’s natural gas pipeline and storage assets indicates that the legend is ready to swing away in the summer.
This week, I’d already discussed why dependable energy stocks like Imperial Oil were undervalued right now. With this move, Berkshire will bolster its already strong energy profile. Investors looking for discounts to start the summer should look at Canada’s energy-rich markets.
Here are some TSX stocks to consider after this bet
Imperial Oil is well worth a stash in early July. Its shares have climbed 28% over the past three months. However, the stock still possesses a favourable price-to-earnings (P/E) ratio of 9.8 and a price-to-book (P/B) value of 0.6. The company opted to maintain its quarterly dividend payout of $0.22 per share. This represents a 4% yield. Imperial Oil has delivered dividend growth for 25 consecutive years. Investors looking to emulate Warren Buffett should consider this stock right now. Imperial Oil is undervalued with a great balance sheet.
Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) is a top energy stock that Canadians should not sleep on to start the summer. Its stock has dropped 42% in 2020 so far. However, shares have climbed 25% over the past three months.
The company faced tremendous headwinds in Q1 2020 but still came out with impressive operational results. It achieved record quarterly corporate production of roughly 1,179 MBOE/d, and it increased the level of high value Synthetic Crude Oil (SCO) production in the first quarter.
Shares of Canadian Natural Resources last had a P/E ratio of 8.8 and a P/B value of 0.8. This puts the stock in attractive value territory. Moreover, the company declared a 13% quarterly dividend increase to $0.425 per share on March 5, 2020. This means it offers a monster 7.2% yield. The company has delivered dividend growth for 20 consecutive years. Now is a great time to mimic Buffett’s energy bet with a purchase in this undervalued dividend beast.
On the topic of billionaire-powered stocks this summer...
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Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends Dominion Energy, Inc.