Warren Buffett is one of the most popular investors to follow, because his strategy is so simple yet so successful. Whether you are brand new or have been investing for years, reading up on Buffett is always a positive way to brush up on your investing knowledge.
So, when looking to invest in stocks, it’s helpful to understand what he looks for when buying a business. First and foremost, when Warren Buffett looks at investing, he’s planning to do so for the long term. Often, if companies are high quality enough and can consistently grow their operations, Buffett may never see a need to sell.
One of the most famous quotes out of Buffett is that his company’s favourite holding period is forever. When you take this approach, you realize that price is important, but nowhere near as important as the business’s quality or the industry that it’s in.
With that in mind, here are three of the top Canadian stocks matching Warren Buffett’s investing criteria.
Top Canadian tech stock
There’s no question that tech stocks are a must-have in your portfolio these days. Not only do they provide some of the best growth, but they have been some of the only stocks that the coronavirus pandemic hasn’t negatively impacted.
Shopify’s business has been expanding rapidly and, because its platform retains most of its users, it continues to look attractive well into the future.
Shopify trades at a massive premium, though. It’s a stock to watch and buy on the dips. However, with that being said, I’d be careful waiting too long for a big dip. That may never materialize, and you could end up missing out on Shopify’s growth altogether.
An airline Warren Buffett would approve of
Another stock that looks like it has an exceptional runway of growth ahead of it is Cargojet (TSX:CJT). Cargojet, again, is the most dominant company in its industry.
The company accounts for over 90% of all overnight shipments in Canada. The demand for overnight cargo has skyrocketed in the pandemic, and Cargojet’s shares have rallied considerably as a result.
Buffett owned several airlines before the pandemic. Airlines have been attractive businesses lately, because they have excellent economies of scale. So, although passenger flights have been impacted, cargo has much of the same qualities.
With the attractive economies of scale that airlines have, profitability should only improve, as demand continues to grow over the years. This is why Cargojet looks so attractive today.
Much like Shopify, though, Cargojet, too, is trading at a hefty premium. This is a reflection of the consensus from the market on how much potential the stock has.
It’s another stock to buy on the dip. But, once again, I wouldn’t wait too long. If you plan on holding it for a while, like Warren Buffett would, the price you buy it at likely won’t matter that much.
Buy long-term stocks like Warren Buffett
Lastly is a more traditional core portfolio stock: Nutrien (TSX:NTR)(NYSE:NTR). Nutrien is a massive $40 billion agricultural company. Its main business includes mining potash, nitrogen, and phosphate products for customers all over the world.
What makes Nutrien so attractive and a typical Warren Buffett business is that it’s a massive and dominant company in an important industry.
Not only that, but Nutrien is very well run and it’s vertically integrated. This helps improve profitability as well as minimize risk.
The dividend stock likely won’t have as much growth potential as the two other stocks on the list. However, it’s a great long-term business that can protect your investment and regularly return cash to you through its 3.4% dividend.
Investing like Warren Buffett is not so much about the stocks you buy. It’s about the mindset you have. The investments Buffett makes will inevitably be different from your investments, because you are in two different financial positions.
So, as long as you’re investing for the long term and buying high-quality companies, you can be confident you’re following in the footsteps of one of the greatest investors of all time.
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Fool contributor Daniel Da Costa owns shares of Nutrien Ltd. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends CARGOJET INC., Shopify, and Shopify. The Motley Fool recommends Nutrien Ltd.