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Warren Buffett: Stop Investing in Canada?

Should investors avoid Canadian stocks because of Warren Buffett? Berkshire Hathaway, Buffett’s investment firm, sold its entire stock holdings in Restaurant Brands International after the first quarter of 2020. The company took a new position in Barrick Gold in the second quarter, then trimmed its position in the next quarter.

While Buffett’s moves were uncharacteristic, especially the gold investment, it’s doesn’t seem to suggest the Toronto Stock Exchange (TSX) is not the right place to invest. Berkshire didn’t dump Suncor Energy (TSX:SU)(NYSE:SU) despite the underperformance. The company even bought more shares of the oil sands king.

Amazing recovery

The TSX has recovered from the pandemic-induced crash in mid-March 2020 and is up 3.24% year to date. Likewise, investors should be excited, with the Reuters poll results saying that Canada’s primary stock market is expected to extend its rebound in 2021.

Poll respondents consist of 27 portfolio managers and strategists. The group’s median forecast for the TSX is 18,000 by year-end 2021. If you recall, the record-high was 17,944.10, registered on February 20, 2020. The index fell to a low of 11,228.50 on March 23, 2020.

Other forecast includes a more than 34% growth in earnings for the TSX next year. Healthcare and consumer cyclical shares should lead the way. Dominique Lapointe, a senior economist at Laurentian Bank Securities, said, “The TSX remains heavily geared towards financials and energy.”

The bank’s economist adds that the worst could be over for both sectors. There should be a more constructive outlook in the months ahead. Oil is gradually recovering after trading below zero in April. Gold posted a record high of $2,072.50 an ounce recently. Meanwhile, the technology sector continues to outpace the field.

Buffett’s top energy stock

Suncor Energy is having a horrendous year, but it remains in Berkshire’s stock portfolio. Buffett’s top energy stock. As of September 30, 2020, Buffett’s conglomerate owns 19,201,525 shares of the Canadian oil exploration and production company. Current investors are still losing by 46% year to date.

The oil sands giant is a Dividend Aristocrat until the oil price war and COVID-19 battered the stock. After Q1 2020, the company slashed its dividends by 55%. Weak commodity prices and impairment charges of almost $1.8 billion led to the $3.53 billion quarterly losses.

Warren Buffett has a penchant for undervalued stocks. The Oracle of Omaha remains confident that Suncor has what it takes to recover lost ground. The primary focus next year is to sustain capital. Under the 2021 capital program ($2.9 to $3.4 billion), the allocation for free funds flow growth projects across the business is $250 million.

Suncor President and CEO Mark Little said, “The decisions we made this year give us the ability to strengthen the balance sheet, increase shareholder returns, and invest in our business to grow future free funds flow.”

If you want to follow Buffett’s lead and initiate a position in the energy stock, the $33.34 billion company pays a 3.8% dividend. Analysts also forecast the price to soar 143% to $53 in the next 12 months.

Attractive options

Aside from Barrick Gold, Buffett’s latest investments include four big pharma stocks and tech startup Snowflake. The legendary investor invests mostly in U.S.-based companies. However, if he has two prominent holdings in Canada, the two stocks should be attractive options.

Source: The Motley Fool