Critics have been hard on Warren Buffett in 2020. The Oracle of Omaha didn’t make all that many exciting trades during the year. However, his firm Berkshire Hathaway did sell 60% of its holdings back in June 2020, wondering what was going to happen with all that cash.
Yet Warren Buffett still remains relatively on the sidelines. But don’t count out this investor yet. In fact, watch closely to the moves he’s been making. What Buffett has been demonstrating is that unfortunately, there are further market crashes on the way.
Berkshire Hathaway has a ton of cash on hand because the market is still incredibly volatile. There is money to be made, and Warren Buffett has done that. However, there is still money to be lost. Until things even out, with the end of the pandemic and global debt down, it’s unlikely Warren Buffett will be investing like he used to.
But what investors can look forward to is movement during the next market crash. When that happens, Warren Buffet should up his stake in these two Canadian firms.
Warren Buffett shocked investors when Berkshire Hathaway bought a stake in gold-mining company Barrick Gold Corp. (TSX:ABX)(NYSE:GOLD) back in August. The company purchased 21 million shares, sending prices soaring. Yet only two months later, the company dropped 40% of its stake down to 12 million shares, sending shares right down again.
So what happened? Warren Buffett likely wanted in on the action gold was producing, without investing in the product itself. That’s because the investor has always believed you strengthen the economy by investing in companies that do something, not just sit pretty. So, Barrick Gold at least mines for gold, and as the world’s second-largest mine with room to grow, it’s a quality company he can get behind.
During the next market crash, it’s like Warren Buffett will again take advantage of a slumped share price to buy Barrick. Once investors start investing in gold again when the market drops, it’s likely shares will see another jump as it did before.
5 TSX Stocks Under $5Click here to learn more!
It’s no secret the oil and gas sector has suffered these last few years. Even before the pandemic things were hard, with an oil and gas glut in Alberta, and a slumping oil price around the world. Suncor Energy (TSX:SU)(NYSE:SU) was amongst those hit hard during the pandemic as production shut down. But despite Warren Buffett trimming his stake in Suncor, it’s not gone all together.
Of all the energy producers out there, Suncor has the strongest chance of coming back from the depths quickly. That’s because it’s the largest fully integrated oil and gas producer in the country. While it’s production is down, it can buy up land and products on the cheap, using its downstream production and marketing revenue to pay for it.
While Suncor has a long way to go, it’s still a quality company with a strong balance sheet. It’s even started looking into green energy projects, and so is great for long-term investors. Should a market crash happen soon, it would be the ideal time for Warren Buffett and others to jump on the stock.
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. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: short March 2021 $225 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and long January 2023 $200 calls on Berkshire Hathaway (B shares).