Warren Buffett said Benjamin Graham’s book “The Intelligent Investor” inspired him and gave him a bedrock philosophy on investing that made sense. That philosophy is simple: buy bargain-priced stocks and sell them when prices rise.
However, Buffett modified the approach. He focused on excellent companies or businesses based on industry growth prospects. Key is to buy them at a fair price and hold them for the long term.
Warren Buffett stocks
Investors brand all stock holdings of Berkshire Hathaway, past or present, as Warren Buffett stocks. The latest 13F filing of his conglomerate (as of September 30, 2023) shows 51 names on the portfolio, with Apple holdings representing 45.9%.
No Canadian firm is on the list, although two remain closely identified with him. Buffett held Restaurant Brands International (TSX:QSR) and Suncor Energy (TSX:SU) for a long time. The legendary investor picked them for their economic moat. Both stocks are underrated but are smart buys right now.
One of Buffett’s famous quotes is, “Never invest in a business you can’t understand,” and RBI’s business is easy to understand. The GOAT started investing in the global quick-service restaurant company in Q4 2014. Today, the $47.6 billion company operates four iconic brands: Burger King, Tim Hortons, Popeyes, Louisiana Kitchen, and Firehouse Subs.
The restaurant stock has done well despite massive headwinds. At $106.72, the year-to-date gain is 3.1%, while the trailing one-year price return is 23.5%. Besides the capital gain, current RBI investors partake in the 2.75% dividend. Buffett played the long game with the stock until COVID-19 came. He felt the business would not survive government-mandated lockdowns and social distancing in 2020.
RBI announced a grand plan this year and a growth accelerator. It will acquire Carrols Restaurant Group for $1 billion. The acquisition target is the largest franchisee of its Burger King brand. Carrols’s cash flow will fund the $500 million investment, including remodeling 600 of the franchisee’s 1,000 restaurants.
Burger King will refranchise the restaurants to smaller franchise operators in five to seven years. Tom Curtis, president of Burger King U.S. and Canada, said in a statement. “This acquisition is an exciting accelerator to our Reclaim the Flame plan,” said Tom Curtis, president of Burger King U.S. and Canada. The deal should close in Q2 2024.
Buffett invested in Suncor Energy (2013) earlier than RBI. The $55.7 billion integrated energy company is an oil bellwether in Canada. It did have problems in 2020 because of the pandemic and oil price war. The energy stock lost its dividend aristocrat when it slashed dividends to preserve cash and protect the balance sheet.
The decision was painful but recovery was sweet. Suncor trades at $43.23 per share if you invest today and pays a hefty 5.04% dividend. Its overall return in 2.99 years is 123.9% (a 30.9% compound annual growth rate). SU is also a perennial volume leader on the TSX.
Suncor’s business outlook is bright. The more than 900,000 barrels per day production average in December was its best single-month performance ever.
Buffett no longer owns RBI or Suncor Energy shares, but his value investing strategy worked with the Canadian stocks. Both have had impressive returns since he sold them in 2020.