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Is Warren Buffett Giving Canada the Cold Shoulder?

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Warren Buffett may have soured on Canada. That’s the takeaway from his latest 13-f filing, which showed that Berkshire Hathaway no longer held any Canadian stocks as of last quarter. While Buffett has owned several Canadian stocks over the years, he sold all of them over the past year-and-a-half. In this article I’ll explore the last Canadian stock Buffett sold, and whether his actions have any bearing on Canadian investors.

Buffett dumps Suncor

In his latest 13-F filing, Warren Buffett revealed that he had sold out of the last Canadian stock he held:

Suncor Energy (TSX:SU)(NYSE:SU).

In the year or so prior to that, he sold two others, Restaurant Brands and Barrick Gold.

These sales don’t necessarily mean that Buffett is bearish on the Canadian economy overall, however. It is well known that Buffett was a net seller of equities in 2020 for the first time in his career. Perhaps his Canadian stocks were simply casualties of his year-long selling spree rather than victims of a bearish view on the Canadian economy.

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Why Buffett sold Suncor

So far, Warren Buffett hasn’t said why he sold out of Suncor Energy. The stock still has many characteristics Buffett likes, such as a cheap valuation compared to book value, and a dividend well covered by cash flows. The company did run four consecutive net losses in 2020, which certainly doesn’t look good. However, the business was affected by weak oil prices, which have since turned around.

At today’s oil prices of $65, West Texas Intermediate or $47 on the Canadian crude index, Suncor will have no trouble turning a profit. Additionally, Suncor was cash flow positive for 2020, its GAAP earnings having been impacted by many non-cash charges.

So, it’s hard to say exactly what Buffett was thinking when he sold Suncor. Perhaps he sold SU shares to generate cash to buy another investment. Perhaps he turned bearish on oil prices. Or perhaps he just wanted to stay out of oil & gas plays for ESG reasons. With no clear comments from Buffett on the matter, we can’t really say for sure.

One thing we do know is that Buffett bought Suncor in two lots: one in 2019 at more than $40 per share, another in 2020 when it was in the low 20s. Perhaps Buffett was getting tired of losing money on the earlier portion of the position he acquired. Suncor has been rallying this year, but it’s still down compared to 2019 prices.

Foolish takeaway

2020 was a rough year for many people, Warren Buffett included. For the first time in his career, he sold out of stocks en masse. By 2021, his entire Canadian portfolio had been axed. It’s easy enough to think that Buffett gave Canada the cold shoulder by selling Suncor Energy. But if we look at his moves over the past year, it probably wasn’t a bearish play on Canada. Buffett sold a lot of stocks in 2020, and with only three Canadian plays to start out the year, it’s not surprising they all got the axe.

Warren Buffett may be out of Canadian stocks, but some of these TSX stocks still look good to us:

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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 Andrew Button has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), short June 2021 $240 calls on Berkshire Hathaway (B shares), and long January 2023 $200 calls on Berkshire Hathaway (B shares).

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