Business

3 Reasons Buffett's Barrick Gold Buy Isn't Such a Crazy Move – Motley Fool

Published

4 years ago

August 17, 2020

Warren Buffett has been an investor for a long time, and his company, Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B), has generated huge returns during his tenure. Yet as the Oracle of Omaha approaches his 90th birthday and Berkshire’s stock has dramatically underperformed the broader market recently, some investors are questioning whether his investment decisions are really still up to snuff.

Late Friday, Berkshire Hathaway released its latest stock portfolio holdings as of June 30. Among them was a completely unexpected company: gold miner Barrick Gold (NYSE:GOLD). Given how Buffett has criticized gold as an investment repeatedly in the past, the investment might seem on its face to contradict everything the Berkshire CEO stands for. Yet investors who question Buffett’s motives here should understand a few reasons why buying a stock with the ticker symbol GOLD isn’t inconsistent with the strategy that got Berkshire where it is today.

1. Gold mining companies are businesses, not commodities

Buffett’s criticism of gold as an investment has always focused on the metal itself. In his 2011 shareholder letter, Buffett talked about how with $9.6 trillion — the value of the 170,000 metric tons in gold worldwide at the time — you could buy every acre of cropland in the U.S. and have enough money left over to buy ExxonMobil 16 times over. You’d even still have $1 trillion in cash left over. The Berkshire CEO noted that the cropland would be immensely productive and ExxonMobil would pay huge dividends, but the block of gold would still be the same block of gold.

Image source: Getty Images.

Barrick Gold is a mining company, and unlike gold itself, mining companies can be productive assets. Indeed, Barrick has been immensely profitable over the past year and a half, capitalizing on the rise in gold prices to earn almost $4 billion in 2019 and another $757 million during the first half of 2020. Barrick has traditionally taken its capital and reinvested some of it into its business, finding growth opportunities to continue. In that vein, Barrick as an investment doesn’t resemble gold bullion at all — and buying Barrick stock isn’t inconsistent with a belief that buying a commodity isn’t a sound investing move.

2. Barrick is value-priced

Buffett has always looked to buy stocks when they were attractively valued, and right now, Barrick fits that bill. The stock trades at less than 11 times its earnings over the past 12 months — even when you consider some of the COVID-19-related challenges that have held back its productivity during much of 2020.

Admittedly, Barrick’s earnings are linked to the price of gold, and that’s been a big part of why its stock price has jumped more than 50% in the first six months of 2020. Yet when you adjust for the asset impairment writedowns that the gold miner has had to take when gold prices fall, Barrick’s operating earnings have been consistently positive even when gold itself was performing poorly.

3. Barrick pays a growing dividend

Buffett also likes stocks that reward shareholders with regular income. Barrick fits the bill, with a modest payout that currently represents a dividend yield of 1.2%.

Moreover, Barrick has shared its success with its shareholders by raising its dividends during good times. Just last week, the company delivered a 14% boost to its quarterly payout, marking the third time in the past four quarters that Barrick has hiked its dividend. The payment is now double what it was just a year ago — and further increases are likely if profits continue to climb.

Buffett and gold could take some getting used to

Sure, it’s always disorienting to see an investor make what seems to be an unusual move, and what Warren Buffett has said about gold in the past seemed to make it unlikely Berkshire would ever own a gold stock. Yet Barrick is one of the giants in the global mining industry, and it’s better positioned than most of its rivals to take advantage of high and rising gold prices as long as they last.

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Business

TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

Published

16 hours ago

November 7, 2024

Anne Joseph

CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

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Business

BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

Published

16 hours ago

November 7, 2024

Anne Joseph

BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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Business

Canada Goose reports Q2 revenue down from year ago, trims full-year guidance

Published

16 hours ago

November 7, 2024

Anne Joseph

TORONTO – Canada Goose Holdings Inc. trimmed its financial guidance as it reported its second-quarter revenue fell compared with a year ago.

The luxury clothing company says revenue for the quarter ended Sept. 29 totalled $267.8 million, down from $281.1 million in the same quarter last year.

Net income attributable to shareholders amounted to $5.4 million or six cents per diluted share, up from $3.9 million or four cents per diluted share a year earlier.

On an adjusted basis, Canada Goose says it earned five cents per diluted share in its latest quarter compared with an adjusted profit of 16 cents per diluted share a year earlier.

In its outlook, Canada Goose says it now expects total revenue for its full financial year to show a low-single-digit percentage decrease to low-single-digit percentage increase compared with earlier guidance for a low-single-digit increase.

It also says it now expects its adjusted net income per diluted share to show a mid-single-digit percentage increase compared with earlier guidance for a percentage increase in the mid-teens.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:GOOS)

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