It can be tough to invest your money during a market crash. While everyone has heard the phrase “buy the dip,” actually doing it can be scary. When markets are crashing, there’s usually a reason for it. It can be hard to tell which companies are actually taking long-term damage from the macro conditions and which are being beaten down unjustly.
This is one of the reasons why investors have looked to Warren Buffett for guidance over the years. Famed for buying in down markets, he has provided good ideas for investing when the going is tough. In this article, I’ll explore three picks he has endorsed over the years — two of them Canadian companies.
Suncor Energy (TSX:SU)(NYSE:SU) is a Warren Buffett-owned energy stock that has been beaten down badly in 2020. So far, Buffett has lost money on the stock, but that hasn’t stopped him from buying more of it. In Q2, it was one of the few stocks that he doubled down on rather than sold out of.
There’s no way to avoid saying it: SU is a very risky play. The company was genuinely damaged by COVID, with a $1.5 billion operating loss in the second quarter. Funds from operations (FFO) was positive at $488 million, but that was down from $3 billion in the same quarter a year before. So, this is not a stock that is being beaten down for no reason. The company is genuinely going through trouble. That’s something investors have to keep in mind, but it also means that if COVID-19 headwinds evaporate, the company stands to bounce back dramatically.
Restaurant Brands International
While he recently exited the position, Restaurant Brands International (TSX:QSR)(NYSE:QSR) was a long time Buffett holding. The company was formed by the merger of Tim Hortons and Burger King. Later, it added Popeyes Louisiana Kitchen, which ended up becoming its biggest growth driver.
While Buffett doesn’t own QSR any more, his protege Bill Ackman still does. It’s not hard to see why. Although the second quarter showed sales declines at Tim Hortons and Burger King, Popeyes sales were up 24%. Overall sales were down 20%. That might look bad on the surface, but remember that once COVID is over, Tim Hortons and Burger King should at least return to normal. That combined with the fact that Popeyes is growing at 24% in the middle of a pandemic is reason for optimism.
Costco Wholesale (NASDAQ:COST) is a staple of Berkshire Hathaway’s stock portfolio. It’s also one of only a handful of stocks that Buffett’s right-hand man Charlie Munger owns other than BRK.A itself. Costco was one of the few non-tech companies that managed to grow in the middle of the COVID-19 pandemic, thanks to customers flocking to its stores to stock up on supplies.
In its most recent quarter, COST earnings increased 12.5% from the same quarter a year before. That’s a very impressive result in the COVID-19 era. COST also boasts many other metrics that value investors look for, like strong returns on equity. Its stock definitely isn’t cheap, but it’s a solid business.
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Fool contributor Andrew Button 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 Costco Wholesale and RESTAURANT BRANDS INTERNATIONAL INC and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares) and short January 2021 $200 puts on Berkshire Hathaway (B shares).