As a staunch believer in the strength of the U.S. economy, the majority of Warren Buffett’s holdings are local. His portfolio is highly geographically centric, which wouldn’t bother Buffett in the least, because he is also against diversification. He believes that people who should know what they are doing (institutional investors) need not pursue diversification, as “diversification is a protection against ignorance.”
That doesn’t mean Buffett doesn’t go out of his geographical domain, ever. He has made a number of foreign investments, most recently in Japan. But even though the Canadian stock market has a lot of overlap with the U.S., he has only opened a handful of positions here, and he closed one of them in 2020.
A lacklustre holding
As a value investor, Buffett doesn’t tend to go for shiny yet unsubstantial investments. He plays the long game and buys businesses that are likely to stay profitable for him for years, even decades. He also likes businesses that have a loyal consumer base, and he has a tender corner in his heart for food-related businesses. These are just a few of the reasons why his Restaurants Brands International (TSX:QSR)(NYSE:QSR) exit was confusing for speculators.
The newly instated Dividend Aristocrat is made up of three strong food chains; two of them (Burger King and Tim Hortons) are rooted deep in their respective communities. Ironically, as per the third-quarter results, these two were outperformed by the relatively newer acquisition, Popeyes. It is the only one of the three brands under RBI that saw its system-wide sales growing in 2020. Tim Hortons saw sales decline in double digits, and Burger King’s global sales took a significant hit.
Warren Buffett doesn’t believe in short-term market fluctuations, so his exit might be indicating a relatively ominous future for the company. If Burger King and Tim Hortons can’t turn their numbers around, RBI might not stay profitable for long.
Another TSX holding
While Buffett exited RBI, he didn’t exit his Suncor (TSX:SU)(NYSE:SU) position, even after the long-standing Aristocrat had to slash its dividends. Buffett’s energy bets seem counterproductive to many, since the energy sector is weakening, and a lot of people believe that the tide is finally turning for green energy.
Still, Buffett’s conviction regarding Suncor has been rewarded — at least in part because the prospects of the energy sector right now are not as dark as they were a few months ago. The demand is rising up, and by controlling the production, oil-heavy countries and companies are aiming to get rid of the surplus oil by the end of this year. If the oil prices keep rising up at a steady pace, Suncor might be able to reclaim some of its former glory.
If you are wondering which one of the two you should choose to add to your portfolio, both might be good options for different investors. Suncor, as an underpriced and discounted energy stock, might be a good value investment bet, and RBI might be a good dividend-growth stock to hold in your portfolio. But if you want to emulate Buffett, you might consider Suncor over RBI.