Warren Buffett’s Most Stunning 2020 Purchase: Buying Gold

Warren Buffett, of all the people in the world, is hedging his bets on gold with his purchase of Barrick Gold shares.

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Calling 2020 an unprecedented year is an understatement. Nobody knew how the year would turn out as the new decade began. The pandemic sent the stock markets reeling, and it seemed like it was finally another opportunity for the Oracle of Omaha to make major moves with Berkshire Hathaway’s massive hoard of cash.

Despite the apparent value opportunities available to him, Warren Buffett remained relatively quiet in the turbulent market. The stock markets recovered after an initial sell-off frenzy, and we never heard of Buffett making major acquisitions.

The latest 13F filing by Berkshire revealed that Buffett made a couple of significant moves. He sold all his shares in Restaurant Brands International and bought shares of Barrick Gold (TSX:ABX)(NYSE:GOLD).

A completely unexpected move

Most investors that start in the field look to Buffett to help them make more savvy investment decisions. Buffett’s excellent track record speaks for itself. The billionaire investor has amassed his fortune by making intelligent money moves and finding value in companies that many would not have considered seriously.

Investors following Buffett’s career to try and emulate his success know that his purchase of Barrick Gold is a completely unexpected move. Warren Buffett has talked about how he hates gold and gold mining companies for several years. He believes that gold does not have any inherent value besides its use in the jewelry industry.

Is gold the right way to go?

Considering Buffett’s long-standing view on gold, it is surprising to learn that Berkshire bought more than $550 million in Barrick Gold shares back in August. If you are wondering whether Buffett has changed his stance on gold, he probably hasn’t.

Buffett’s Berkshire certainly made the acquisition, but it wasn’t Buffett himself that made the move. The 13F filing revealed the names of the people at Berkshire responsible for investing in Barrick, and Buffett is not one of them. However, if he opposed investing in Barrick, it is unlikely that his conglomerate would invest in the gold mining company.

The fundamentals for Barrick seem solid enough for Buffett to consider the company. Barrick is a safe choice to consider amid the rising gold prices. The increase in its profits has allowed Barrick to pay down most of its debt and improve its cash flow.

The company is also making acquisitions and increasing its mining operations to continue bringing in more revenue. Barrick is currently one of the largest global gold producers. The higher gold prices are driving more profits for the company.

With expectations of a second market crash and further volatility, gold prices will likely continue to increase. The result could be a massive boost to the valuation of gold miners like Barrick Gold.

Foolish takeaway

The year 2020 has taken everybody by surprise. From a global pandemic to Warren Buffett making uncharacteristic moves, it is safe to say that we cannot predict what will happen in 2021. With the likelihood of another market crash, Barrick Gold could be a safe place to park your funds to see your wealth grow amid market volatility.

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 RESTAURANT BRANDS INTERNATIONAL 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).

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