Warren Buffett is considered one of the most value-focused investors of our time. And while it’s true that he has made fortunes investing in troubled companies and leveraging recessions, he isn’t always after the lowest valuation point. This was evident in the 2020 market crash when Buffett didn’t start buying after the market was about halfway into recovery.
This also falls in line with Buffett’s practice of buying wonderful companies at a fair price. And while he didn’t buy much after the crash, his selections still made headlines, thanks mostly to their unconventional nature. He purchased an IPO after several decades. And he bought into gold — a metal he has spoken against on numerous occasions.
Buffett’s golden investment
This is no secret that Buffett isn’t a fan of gold. He always considered it a wrong long-term holding and something that doesn’t grow nearly as well in value as stocks do. He didn’t even like the metal as a hedge against market headwinds and asserted that it’s better to bet on the stock market in the long run than on the metal.
And then he bought into gold. He didn’t buy and store the metal itself. Instead, he invested nearly US$564 million in the Canadian mining company, Barrick Gold (TSX:ABX)(NYSE:GOLD). We can assume that the purchase had more to do with the company itself then its mining business and dependence on gold.
A Canadian mining company
Barrick Gold has been around for a few decades. It wasn’t always a mining company but evolved to that form after its original prospects (oil and gas) didn’t prove very fruitful. The founder, Peter Munk, decided to refocus on gold instead. The company was listed on the TSX in 1983. Now, it is headquartered in Toronto and has mining operations in 13 countries.
The company also focuses on mining copper, which spreads out its asset portfolio. Copper is one of the most consistently in-demand metals, thanks to its use as a conductor. Barrick Gold’s mining operation is also geographically diversified. It has full and partial stakes in mines in North America, South America, Africa, and Asia.
Like most other gold companies, Barrick Gold stock surged in the 2020 market crash. Buffett’s investment also gave a significant boost to the company. But now that the stock market is well on its way to recovery, the momentum Barrick Gold built is breaking. The company looks fundamentally sound, with a strong balance sheet and relatively consistent revenues.
Warren Buffett’s investment in gold (for whatever reason) shows that the wizard of Omaha is still capable of change. Instead of clinging to his old ways, he is trying to create a better future for Berkshire Hathaway by adapting to the new realities. So, even if you don’t want to emulate his golden move and buy Barrick Gold, you can learn from his willingness to change and adapt.
Speaking of Warren Buffett...
Motley Fool Canada's market-beating team has just released a new FREE report that gives our three recommendations for the Next Gen Revolution.
Click on the link below for our stock recommendations that we believe could battle Netflix for entertainment dominance.
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) 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 December 2020 $210 calls on Berkshire Hathaway (B shares).