Warren Buffett: Prepare Now and Buy Gold!

Warren Buffett usually stays away from gold, but even he is seeing the value in picking up some gold stocks during this market downturn.

| More on:
gold stocks gold mining

Image source: Getty Images

Of all the people to recommend buying gold, Warren Buffett has to be dead last. The investing mogul tends to stay far away from gold companies; even during a recession. That’s because the billionaire believes that we need to invest in the country, and gold is investing against it.

As the United States dollar decreases, the price of gold increases. But gold doesn’t actually produce anything beyond the mineral. So if you’re going to support the economy, Warren Buffett argues, then you need to invest in producers. Take a look at his investments and you’ll see exactly what he means.

But even Warren Buffett realizes that this pandemic could last years. That means the economic could continue to plummet during that period. Even after the virus is gone, an economic collapse was predicted. So it could be half a decade before we see any return to normalcy.

So what did Buffett do? Buy gold!

It’s true!

After decades of staying away from the mineral, Warren Buffett actually bought a large stake in Barrick Gold Corp. (TSX:ABX)(NYSE:GOLD). It’s a solid investment within the gold mining industry, as Barrick continues to outpace most gold miners and even the price of gold itself. But economists believe gold will continue to rally, putting Barrick in a prime position to continue making strong returns.

Look at its balance sheet and you’ll see exactly what I mean. The company saw revenue grow year over year by 39.6% during the lastest earnings report. Net income was also up 24.8%! Shares, meanwhile, are up 38.89% this year alone, and 231% over the last five years.

Now what this choice gets you is safety. This company is a streaming service, so you can pretty much count on the price going up. However, gold is changing, so there is another option to see huge returns during this gold price boom.

Gold miner mergers

Right now, gold companies around the world are merging. This means not only is there the potential for more mines, but also mines around the world. This diverse portfolio means that gold mines could actually outpace these streaming companies like Barrick. In fact, some already have.

Take Kirkland Lake Gold Ltd. (TSX:KL)(NYSE:KGI) for example. The company has been merging and acquiring gold mines for the last few years. It now has a vast array of mines around the world. Even during the pandemic, as one mine slumped, another would pick up the pace. This has been proven again and again in its balance sheet. Revenue was up a whopping 74.8% year over year during the last quarter, and net income up 33.2%.

The great news is right now Kirkland is at a discount. That’s because it’s had to dispose of some of its investments. But this won’t hurt the stock overall, it still has a ton of mines around the world to pick up the slack. That’s why economists believe the miner is at a 42% discount as of writing!

Bottom line

You could go with an option like Warren Buffett’s and invest in a streaming company. However, gold mines merging means you could see enormous returns now, during a financial crisis, and decades from now. Kirkland is ahead of the pack in this regard. You could turn a $10,000 investment into $16,800 in only a year if you bought up shares today!

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 Amy Legate-Wolfe has no position in any of the stocks mentioned.

More on Coronavirus

Aircraft wing plane
Coronavirus

Should You Buy Air Canada Stock While it’s Below $18?

Air Canada (TSX:AC) stock is below $18. Should you invest?

Read more »

Illustration of data, cloud computing and microchips
Stocks for Beginners

3 Canadian Stocks That Could Still Double in 2024

These three Canadians stocks have been huge winners already in 2024, but still have room to double again in the…

Read more »

Aircraft Mechanic checking jet engine of the airplane
Coronavirus

Can Air Canada Stock Recover in 2024?

Air Canada (TSX:AC) stock remains close to its COVID-19 era lows, even though its business has recovered.

Read more »

A airplane sits on a runway.
Coronavirus

3 Things to Know About Air Canada Stock Before You Buy

Air Canada stock continues to hover below $20 despite the sharp rise in travel demand seen across the industry. What's…

Read more »

tech and analysis
Stocks for Beginners

If You Invested $1,000 in WELL Health in 2019, Here is What It’s Worth Now

WELL stock (TSX:WELL) has fallen pretty dramatically from all-time highs, but what if you bought just before the rise? Should…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Coronavirus

2 Pandemic Stocks That Are Still Rising, and 1 Offering a Major Deal

There are some pandemic stocks that crashed and burned, while others have made a massive comeback. And this one stock…

Read more »

Dad and son having fun outdoor. Healthy living concept
Dividend Stocks

1 Growth Stock Down 15.8% to Buy Right Now

A growth stock is well-positioned to resume its upward momentum in 2024 following its strong financial results and business momentum.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Stocks for Beginners

3 Things About Couche-Tard Stock Every Smart Investor Knows

Couche-tard stock (TSX:ATD) may be up 30% this year, but look at the leadership and history of the stock to…

Read more »