Now that Warren Buffett has effectively bought gold, here’s how I’m investing for the rest of 2020
The Motley Fool
Published Aug 19, 2020 16:09
Now that Warren Buffett has effectively bought gold, here’s how I’m investing for the rest of 2020
The gold price has already been on a tear in 2020. Now regulatory filings reveal that Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) bought a stake in mining company Barrick Gold. I reckon that for the many investors who follow Buffett, the yellow metal just became an even more attractive investing proposition.
Decoding Warren Buffett’s gold buy The way I see it, there are two ways of decoding Buffett’s investment. One, is to take the investment at face value. Barrick Gold is a force to reckon with as a leading global gold miner, after its merger with Randgold Resources (LON:RRS) was finalised early last year. Two, we can look at it as a vote for gold at a time of economic uncertainty. If this is seen in conjunction with Buffett’s reduced stake in US-based financials, it appears that the legendary fund manager is bearish on the economy, and has hedged investments against gold.
I think there can truth to both arguments, which provides pointers for investors. The first pointer is that gold investing is the way to go now. And Buffett is not the only investor to be bullish on gold. Another long-time investor and co-founder of Soros Fund Management, Jim Rogers, also encourages buying precious metals on dips. For investors who’d like to buy gold mining shares now (other than Barrick Gold, which has seen its share price run up to multi-year highs) there are good ones to consider listed on the London Stock Exchange. For instance, Centamin Mining‘s share price has just come off all-time highs and it could be in for a year of robust performance.
Where not to invest The second pointer investors can take is from Buffett cutting back on his exposure to financials. Now, these are US-based banks, whose issues are at least somewhat different from those of the UK’s financials. But this too, is an investing idea to think through. Our portfolios are benefited as much by what we hold as what we don’t hold.
Banks are in an unenviable place right now for a number of reasons. Because of a record contraction in the economy, they are bracing for a spate of bad debts. Also, new loans have slowed down in the current circumstances, which hits bank income. In any case, income was impacted by low interest rates.
All banks’ latest results are disappointing and, until the economy normalises, fluctuations in their fortunes are likely. Even after that, banks may take their own time to recover. Consider the Lloyds Bank share price, which has languished for years.
If I want to draw inspiration from the likes of Buffett, I would look at other sectors. For instance, FTSE 100 defensives have performed well during the crisis, and I reckon they’ll continue to do so even into 2021. Moreover, there are still high-quality companies available at low prices that should perform over time. Buffett likes to buy stakes in quality companies at low prices. I think investing in these companies will hold investors in good stead.
Get The App
The post Now that Warren Buffett has effectively bought gold, here’s how I’m investing for the rest of 2020 appeared first on The Motley Fool UK.
us better investors.
Motley Fool UK 2020
First published on The Motley Fool
Written By: The Motley Fool
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.