Warren Buffett: 2 Brilliant Moves He Made in 2020

Warren Buffett made two brilliant moves in 2020. The first was the repurchase of Berkshire Hathaway shares. His second intriguing move was seeking the safety of Barrick Gold stock.

| More on:
Gold king in chess game face with the another silver team on black background (Concept for company strategy, business victory or decision)

Image source: Getty Images

Warren Buffett has regained his bearing after the COVID-19 shock kept him away from the market in the first half of 2020. The legendary investor was criticized for being a net seller of stocks instead of an aggressive buyer. However, his conglomerate has drawn about US$18.5 billion already from its cash hoard in the third quarter.

The GOAT (greatest of all time) of investing is a value hawk, although some of Berkshire Hathaway’s stock purchases were uncharacteristic, if not surprising. Buffett invested in tech IPO Snowflake and five trading giants in Japan. His scorn of IPOs is well known, while he was always been highly critical of Japanese firms.

Last week, Berkshire Hathaway lost US$1.6 billion from Bank of America and Wells Fargo. Both bank stocks tanked after reporting steep declines in revenue. The pandemic continues to weigh on the banking sector. Still, Buffett made a pair of brilliant moves in 2020.

He bought his own stocks

Warren Buffett didn’t go far to use US$6.8 billion of his colossal cash stockpile. Based on Berkshire’s quarterly filings with the SEC, the company repurchased its shares during the first (US$1.7 billion) and second (US$5.1 billion) quarters of 2020.

The investment amount is more than Buffett’s total spending on stocks this year. Previously, Berkshire could only repurchase its stocks if the book value drops to 120%. However, internal rules have changed.

If Berkshire has $20 billion in cash in the war chest, Buffett and his deputy Charlie Munger can repurchase the stocks. The two, however, must agree that the Berkshire stock is trading well below the company’s intrinsic value. Also, Buffett appears to be in catch-up mode after years of idleness.

Some analysts say the buybacks indicate Buffett’s confidence in the U.S. economy. Berkshire Hathaway’s stock portfolio consists of top American corporations that have strong cyclical links to the economy. Buffett remains bullish on the long-term growth potential of the U.S.

Canadian safety net

As much as possible, Buffett invests in American companies only. Likewise, gold doesn’t appeal to the Oracle of Omaha. He views the precious metal as incapable of creating anything and is nothing more but space filler. Interestingly, the latest safety net of Buffett is a gold-mining stock across the border.

Berkshire Hathaway bought shares of Canadian miner Barrick Gold (TSX:ABX)(NYSE:GOLD). Buffett’s empire now owns $563.6 million worth of shares. The sudden interest stems from the U.S. Federal Reserve’s actions, as it eases on its policies that will impact the U.S. dollar. It presents a substantial upside for gold in the next 12 to 24 months, given global and U.S. bonds’ nominal returns.

Barrick Gold is the world’s second-largest gold miner with a market capitalization of $64.61 billion. The gold stock sunk to $21.57 on March 13, 2020, during the market selloff but is now trading at $36.34 (+68% rally). The year-to-date gain is 52%. For would-be investors, Barrick pays a 1.16% dividend — the highest among gold stocks.

Future moves

Don’t count out Warren Buffett in 2020. Expect Berkshire Hathaway to make some earth-shaking moves soon. The latest buzz is that talks are ongoing with Japan’s Mitsui for potential collaboration to expand the partnership’s global network.

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 Christopher Liew 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 Snowflake Inc 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).

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »