Warren Buffett is a billionaire because he’s smart with money. The legendary value investor looks for companies with solid fundamentals and potential for continued growth. He used to own shares of Canadian firms with the same qualities.
Berkshire Hathaway, Buffett’s conglomerate, has no more holdings in Suncor Energy (TSX:SU)(NYSE:SU), Restaurant Brands International (TSX:QSR)(NYSE:QSR), and Barrick Gold (TSX:ABX)(NYSE:GOLD) after Q1 2021. Somehow, it makes you wonder if he was mistaken for ditching the stocks. All three are the best value buys in 2021.
More free cash flow is coming
Suncor Energy has risen from the gutter and is now among the top-performing energy stocks. At $29.61 per share, the year-to-date gain is 40.79%. The dividend yield is a decent 2.85%. Market analysts also forecast the share price to climb further to $37.16 (+25.5%).
The outsized gains of the energy sector (+52.61) thus far in 2021 is proof the oil resurgence is the primary reason for the outperformance of most constituents, including Suncor. Goldman Sachs’s analyst Umang Choudhary believes that Canadian oil producers are the most attractive at current levels.
The U.S. investment bank recommends investors should buy Suncor along with Canadian Natural Resources and Cenovus Energy. All these companies are well positioned to produce more free cash flow.
Global growth potential
Buffett dumped Restaurant Brands International in Q1 2020 at the onset of the pandemic. He thought the shutdowns of restaurants would kill the business of the quick-service restaurant chain for good. However, the operator of Burger King, Tim Hortons, and Popeyes made a resounding comeback in the same year.
Today, the stock remains above water with its 4.78% year-to-date gain. Note that the current share price of $80.24 is 104.5% higher than the COVID low of $39.24 on March 18, 2020. If you invest now, the dividend yield is 3.25%.
In Q1 2021 (quarter ended March 31, 2021), RBI’s top and bottom lines increased by 2.9% and 14.6% versus Q1 2020. All three iconic fast-food chains reported revenue growth. The results surpassed the Q1 2019 system-wide sales, while the net restaurant growth nearly matched RBI’s best-ever Q1 performance in 2018. Its CEO, José E. Cil, is excited about its brands’ global growth potential.
Strong financial performance
Buffett briefly held Barrick Gold, which shows his low regard for the world’s most precious metal. Year to date, the gold stock underperforms (-7.1%) at the current price of $26.56. Still, market analysts are bullish and see a potential upside of between 34.8% and 63.2%.
Based on an Insider Monkey article, hedge funds rank the $47.23 billion gold and copper producer as one of today’s the top five mining stocks. Besides Canada and the U.S., Barrick has ownership interests in Argentina, Mali, and other countries. In Q1 2021 (quarter March 31, 2021), its tier-one gold mines delivered strong financial performances.
Mark Bristow, Barrick Gold’s CEO, is optimistic for the rest of 2021, since cash flows increased to record levels and the debt burden is lighter. The company’s achievements will help build on a foundation of a great asset base. He cites a fit-for-purpose structure and a lean and agile leadership.
Warren Buffett has his reasons for letting go of the Canadian stocks, particularly his long-time value stocks Suncor Energy and Restaurant Brands. However, he might have prematurely sold them. Berkshire Hathaway’s gains would have been massive today.
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 Christopher Liew 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: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares).