There’s no question that Warren Buffett is one of if not the best investors of all time. So it makes sense to try to learn as much as you can from Buffett and understand how exactly he picks his stocks in order to pick the top stocks to buy for your portfolio.
When it comes to Buffett, there are a few factors he always looks for.
Image source: The Motley Fool
How does Warren Buffett select which stocks to buy?
First and most importantly, he’s always keeping a long-term mindset, so he’s looking for companies with a long track record of success as well as a tonne of long-term growth potential in the future.
Whereas he stays away from stocks that are hot today or seemingly only have potential in the short term as they are highly speculative.
Furthermore, it’s much harder to predict where a stock or the economy will be a year from now than it is 5 or 10 years from now, considering the market and economy are constantly growing over the long haul.
In addition to keeping a long-term mindset, though, when assessing individual companies, there are a few key qualities that Warren Buffett always looks for.
First off, it’s essential to find companies with strong and sustainable competitive advantages. This is what allows businesses to outperform their peers and grow at an attractive and consistent pace for years.
It’s also important to find stocks with strong management teams. After all, it’s up to management to grow the value of your capital over the long term.
Buffett also ensures the stocks he’s buying have attractive financials. This includes both the economics of the company’s operations as well as the strength of its balance sheet and how much debt it may have.
Finally, if all else fits the bill, Buffett ensures that if he’s buying a stock, he’s buying it at a reasonable valuation. Although he’s well known for being a value investor, and that’s how he got his start, these days, he looks for growth stocks he can buy at a reasonable price.
In fact, one of his most famous sayings that perfectly sums up how Buffett likes to invest is, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
So with that in mind, here are two top Canadian stocks to buy now if you’re looking to invest like Warren Buffett.
Two top long-term growth stocks trading at reasonable valuations
There are several high-quality Canadian stocks to buy if you’re looking to invest like Buffett, but two of the best to consider today are Dollarama (TSX:DOL) and Brookfield Infrastructure Partners (TSX:BIP.UN).
First off, both stocks have an impressive track record to date and significant growth potential going forward.
Dollarama has been growing its operations for years in Canada. Even with plans to open 60 to 70 stores annually for at least the next few years, it’s also growing in Latin America with its investment in Dollarcity.
Meanwhile, Brookfield is constantly looking to grow its operations and cash flow by both investing in the infrastructure assets it owns all over the world and consistently recycling capital.
Furthermore, each of these stocks boasts a strong competitive advantage and, as proven by their impressive track records, has strong and competent management teams.
In Dollarama’s case, the stock is one of the best-known retailers in Canada. It’s the go-to spot for consumers looking to save money on household goods, as well as for specialty goods, such as school project supplies or seasonal products.
Meanwhile, Brookfield is one of the best-known asset managers in the world. Its access to billions in funds plus its global reach allows it to diversify its operations, mitigating risk and exposing Brookfield to more potential growth.
Finally, each of these stocks is financially sound and trades at attractive valuations. While Dollarama’s not necessarily cheap, the growth premium it trades at is certainly warranted, especially with the significant growth potential it has in the current environment.
Meanwhile, Brookfield’s average analyst target price is nearly 20% higher than where it trades today, plus it offers an attractive yield of roughly 5.1%.
So if you’re looking for high-quality stocks to buy like Warren Buffett, these are two of the best to consider.
