Warren Buffett may be a legendary investor, but it’s still a foolish (that’s a lower-case f, folks!) to follow the man move for move. Why? You’ll be paying a “Buffett premium” at the time the man reveals he’s initiated a position in a name once the general public learns of it in his 13F filing. Warren Buffett has many fans, and many of them are inclined to follow him blindly into stocks, thinking that such a strategy can help them punch their ticket to outsized gains.
Moreover, by the time a new Warren Buffett stock is disclosed to the masses, the cost basis may be higher than that of the Oracle of Omaha’s. The man does have a knack for spotting winners, after all! Regardless, I think it’s much more valuable for beginner investors to learn from the man’s words of wisdom instead of imitating him blindly.
As the proverb goes: “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.”
Undoubtedly, Warren Buffet has taught many new investors how to fish over his investment career.
There may be an instance where a stock you’ve analyzed or owned ends up being bought by Warren Buffett after the fact, confirming your investment thesis in a name. I’ve had this happen before, with shares of Apple, which I owned prior to Buffett taking his first big bite out of the stock.
Suncor Energy: Calling all contrarian, deep-value investors
If you’re able to land a cost basis on a Warren Buffett-approved stock that’s similar to or even better than Buffett, it may make sense to scoop up the stock under question. Consider shares of Suncor Energy (TSX:SU)(NYSE:SU), a Buffett-owned stock that has been nosediving in recent months. The investment in the Canadian oil kingpin has not gone well for Berkshire Hathaway thus far.
But as you may know, Warren Buffett doesn’t care as much, if at all, about stock price fluctuations over the short term, as long as his long-term investment thesis is still fully intact. He’s more than willing to look wrong over the course of many months if it means being right over the long haul. When it comes to shares of Suncor, I think the man is right on the money and would be surprised if he hasn’t doubled down on his position following the stock’s latest dive.
Even if he hasn’t, investors who are already bullish on the name can nab a cost basis that’s likely better than that of Warren Buffett’s. Suncor is up against it, with the continued rise of renewable energy stocks. But if you don’t mind being caught on the wrong side of a secular trend with fossil fuel plays and seek deep value, I’m not against picking up shares here, as you look to stand alongside Warren Buffett with the name.
Suncor Energy: A top way to grab a better cost basis than Warren Buffett?
Oil prices have recovered significantly following the March-April 2020 plunge that saw WTI prices briefly fall into negative territory. Suncor Energy stock? Not so much. The stock has remained stuck in limbo for months, but as demand continues to rebound in conjunction with the world economy, I think there’s a strong case for buying Suncor shares on the dip.
It’s a best-in-breed player in the Albertan oil patch, and I think it’s still worth betting on with the stock at a mere one times its book value.
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Fool contributor Joey Frenette owns shares of Apple and Berkshire Hathaway (B shares). David Gardner owns shares of Apple. The Motley Fool owns shares of and recommends Apple and Berkshire Hathaway (B shares) and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), short March 2021 $225 calls on Berkshire Hathaway (B shares), and long January 2023 $200 calls on Berkshire Hathaway (B shares).