In the summer, I discussed how investors can avoid being burned in a market crash by following the advice of Warren Buffett. Ahead of a hugely hyped election, it should come as no surprise that many were seeking Buffett’s perspective. Most recently, Buffett endorsed Hillary Clinton and Barack Obama. However, Warren Buffett avoided making an endorsement ahead of this election.
Today, I want to look at three tips that we can take away from the investing legend. Let’s dive in.
Warren Buffett: Bet on nations, not politicians
Warren Buffett is known for his success as an investor and his unbridled optimism in his home country. Because of this, Buffett has always been adamant in betting on the United States rather than on its leadership in any given era. From the votes that have been counted, Joe Biden appears to have crossed the Electoral College threshold to become President-Elect.
However, Donald Trump and a considerable number of his Republican colleagues have refused to concede. A lengthy legal battle may be on the horizon. However, more optimistic observers have reassured onlookers that this is all talk and gamesmanship.
In 2017, I discussed Ray Dalio’s comments on the political landscape’s impact on the investing world. He predicted that politics would “play a greater role in affecting markets” than any time since 1937. The last three years have supported this prediction.
There is no telling how markets may react to what could develop into a full-blow constitutional crisis in the United States. I’m inclined to support Warren Buffett’s position. It is not wise to bet against the strength and vibrancy of the U.S. economy going forward.
Seek value, especially in this environment
Warren Buffett is perhaps the most influential proponent of value investing on the planet. North American markets have managed to build significant momentum following the market crash in March. However, there are still some attractive value plays out there.
Manulife Financial (TSX: MFC)(NYSE: MFC) is one of my favourite TSX stocks right now. It is a big player in the insurance and financial services space. Shares of Manulife have dropped 13% in 2020. However, the stock has increased 15% week over week. It is expected to release its third quarter 2020 results today.
This stock last possessed a price-to-earnings ratio of 11 and a price-to-book value of 0.8. That puts Manulife in attractive value territory. Moreover, it offers a quarterly dividend of $0.28 per share. This represents a strong 5.1% yield. Manulife is a TSX stock that fits the Warren Buffett value investing mold.
Scotiabank is a top Canadian bank stock that I’m bullish on in November. Its shares have increased 8.9% week over week. Still, this stock has a favourable P/E ratio of 10 and a P/B value of 1.1. Scotiabank also boasts a quarterly dividend of $0.90 per share, which represents a strong 5.8% yield.
Follow Warren Buffett’s lead in 2020 – Exercise caution
Warren Buffett’s name echoes constantly in the investing world, even when he is quiet. That has been the case in 2020, when investors have been particularly hungry for his advice. Actions speak louder than words, and Buffett is exercising caution in what looks like an overvalued market. The Buffet Indicator, which measures total market cap to gross domestic product (GDP), has flashed red for months.
Though Warren Buffett has never been a big fan of gold as an investment, Berkshire Hathaway did add a $500 million position in Barrick Gold earlier this year. Investors should not be afraid to hedge with precious metals equities.
This may be especially prudent as optimism sweeps across the market after a promising vaccine report from Pfizer. Even in the best-case scenario, we are many months away from leaving this devastating pandemic behind.
