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

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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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Stop Asking Your Interviewer Cliché Questions

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Most job search advice is cookie-cutter. The advice you’re following is almost certainly the same advice other job seekers follow, making you just another candidate following the same script.

In today’s hyper-competitive job market, standing out is critical, a challenge most job seekers struggle with. Instead of relying on generic questions recommended by self-proclaimed career coaches, which often lead to a forgettable interview, ask unique, thought-provoking questions that’ll spark engaging conversations and leave a lasting impression.

English philosopher Francis Bacon once said, “A prudent question is one half of wisdom.”

The questions you ask convey the following:

  • Your level of interest in the company and the role.
  • Contributing to your employer’s success is essential.
  • You desire a cultural fit.

Here are the top four questions experts recommend candidates ask; hence, they’ve become cliché questions you should avoid asking:

  • “What are the key responsibilities of this position?”

Most likely, the job description answers this question. Therefore, asking this question indicates you didn’t read the job description. If you require clarification, ask, “How many outbound calls will I be required to make daily?” “What will be my monthly revenue target?”

  • “What does a typical day look like?”

Although it’s important to understand day-to-day expectations, this question tends to elicit vague responses and rarely leads to a deeper conversation. Don’t focus on what your day will look like; instead, focus on being clear on the results you need to deliver. Nobody I know has ever been fired for not following a “typical day.” However, I know several people who were fired for failing to meet expectations. Before accepting a job offer, ensure you’re capable of meeting the employer’s expectations.

  • “How would you describe the company culture?”

Asking this question screams, “I read somewhere to ask this question.” There are much better ways to research a company’s culture, such as speaking to current and former employees, reading online reviews and news articles. Furthermore, since your interviewer works for the company, they’re presumably comfortable with the culture. Do you expect your interviewer to give you the brutal truth? “Be careful of Craig; get on his bad side, and he’ll make your life miserable.” “Bob is close to retirement. I give him lots of slack, which the rest of the team needs to pick up.”

Truism: No matter how much due diligence you do, only when you start working for the employer will you experience and, therefore, know their culture firsthand.

  • “What opportunities are there for professional development?”

When asked this question, I immediately think the candidate cares more about gaining than contributing, a showstopper. Managing your career is your responsibility, not your employer’s.

Cliché questions don’t impress hiring managers, nor will they differentiate you from your competition. To transform your interaction with your interviewer from a Q&A session into a dynamic discussion, ask unique, insightful questions.

Here are my four go-to questions—I have many moreto accomplish this:

  • “Describe your management style. How will you manage me?”

This question gives your interviewer the opportunity to talk about themselves, which we all love doing. As well, being in sync with my boss is extremely important to me. The management style of who’ll be my boss is a determining factor in whether or not I’ll accept the job.

  • “What is the one thing I should never do that’ll piss you off and possibly damage our working relationship beyond repair?”

This question also allows me to determine whether I and my to-be boss would be in sync. Sometimes I ask, “What are your pet peeves?”

  • “When I join the team, what would be the most important contribution you’d want to see from me in the first six months?”

Setting myself up for failure is the last thing I want. As I mentioned, focus on the results you need to produce and timelines. How realistic are the expectations? It’s never about the question; it’s about what you want to know. It’s important to know whether you’ll be able to meet or even exceed your new boss’s expectations.

  • “If I wanted to sell you on an idea or suggestion, what do you need to know?”

Years ago, a candidate asked me this question. I was impressed he wasn’t looking just to put in time; he was looking for how he could be a contributing employee. Every time I ask this question, it leads to an in-depth discussion.

Other questions I’ve asked:

 

  • “What keeps you up at night?”
  • “If you were to leave this company, who would follow?”
  • “How do you handle an employee making a mistake?”
  • “If you were to give a Ted Talk, what topic would you talk about?”
  • “What are three highly valued skills at [company] that I should master to advance?”
  • “What are the informal expectations of the role?”
  • “What is one misconception people have about you [or the company]?”

 

Your questions reveal a great deal about your motivations, drive to make a meaningful impact on the business, and a chance to morph the questioning into a conversation. Cliché questions don’t lead to meaningful discussions, whereas unique, thought-provoking questions do and, in turn, make you memorable.

_____________________________________________________________________

 

Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to artoffindingwork@gmail.com.

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Canadian Natural Resources reports $2.27-billion third-quarter profit

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CALGARY – Canadian Natural Resources Ltd. reported a third-quarter profit of $2.27 billion, down from $2.34 billion in the same quarter last year.

The company says the profit amounted to $1.06 per diluted share for the quarter that ended Sept. 30 compared with $1.06 per diluted share a year earlier.

Product sales totalled $10.40 billion, down from $11.76 billion in the same quarter last year.

Daily production for the quarter averaged 1,363,086 barrels of oil equivalent per day, down from 1,393,614 a year ago.

On an adjusted basis, Canadian Natural says it earned 97 cents per diluted share for the quarter, down from an adjusted profit of $1.30 per diluted share in the same quarter last year.

The average analyst estimate had been for a profit of 90 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Oct. 31, 2024.

Companies in this story: (TSX:CNQ)

The Canadian Press. All rights reserved.

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Cenovus Energy reports $820M Q3 profit, down from $1.86B a year ago

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CALGARY – Cenovus Energy Inc. reported its third-quarter profit fell compared with a year as its revenue edged lower.

The company says it earned $820 million or 42 cents per diluted share for the quarter ended Sept. 30, down from $1.86 billion or 97 cents per diluted share a year earlier.

Revenue for the quarter totalled $14.25 billion, down from $14.58 billion in the same quarter last year.

Total upstream production in the quarter amounted to 771,300 barrels of oil equivalent per day, down from 797,000 a year earlier.

Total downstream throughput was 642,900 barrels per day compared with 664,300 in the same quarter last year.

On an adjusted basis, Cenovus says its funds flow amounted to $1.05 per diluted share in its latest quarter, down from adjusted funds flow of $1.81 per diluted share a year earlier.

This report by The Canadian Press was first published Oct. 31, 2024.

Companies in this story: (TSX:CVE)

The Canadian Press. All rights reserved.

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