Are investors falling into a trap with the stock market chasing new highs? The highs seem to suggest that uncertainty no longer dominates the investment landscape. But if you were to look at Warren Buffett’s recent moves, investing’s (greatest of all time) GOAT is bracing for something else – a huge stock market crash.
The chef at Berkshire Hathaway has never been charmed by the sparkle of gold. However, Buffett did an about-face and took a stand in Barrel gold. His conglomerate bought $ 21 million in shares in the Canadian gold producer. At the same time, he gave up all of his shares in an investment banking giant and reduced his holdings in bank stocks.
New reality
Some experts warn that the stock rally is no longer a reflection of the economy at large. The Canadian economy remains in a precarious state, despite recovering 50% of the jobs lost in March and April 2020. If Warren Buffett undergoes a conversion and switches to gold stocks, it signals unique risks.
Buffett’s sudden change in stance seems headed for a new reality. Expensive stimulus packages are pushing deficits to unprecedented levels and inflating national debts. Canada is on track to post a deficit of $ 343 billion this year, and the government projects the federal debt to exceed $ 1.1 trillion in 2020-21.
Buffett’s stock holdings
Buffett’s investment process is fully on display, although some of his moves are surprising. As of June 30, 2020, its holdings in Goldman Sachs and Canadian fast food chain International restaurant brands. Berkshire added more Bank of America reduced shares and holdings in JPMorgan Chase and Wells fargo.
Berkshire also bought $ 5.1 billion of its own stock – a record amount and the most ever in a single period. Barrick Gold is the only new addition to Buffett’s portfolio. The gold stock also replaces Restaurant Brands as one of only two Canadian stocks in the basket.
Bellwether energy stock
Suncor Energy (TSX: SU) (NYSE: SU), Calgary’s $ 31.86 billion integrated energy company, remains in Buffett’s stock portfolio, despite continued underperformance in 2020. This energy stock is struggling and lost 49.68% year-to-date, while Restaurant Brands is down 12.34%.
Many ask if Suncor is due for a breakout. The King of the Oil Sands recorded consecutive quarterly losses in 2020. In the first quarter, the company reported operating losses of $ 309 million compared to $ 1.2 billion in operating profits in the first quarter of 2019. For in the second quarter, the net loss was $ 1.489 billion compared to net income of $ 1.25 billion in the second quarter of 2019..
Management said weak demand for crude oil and refined products as well as increased supply of OPEC + have resulted in a significant drop in commodity prices. However, Suncor made significant progress in reducing operating and capital costs in the second quarter of 2020. It remains on track to meet operating cost reduction targets of $ 1 billion and $ 1.9 billion in capital costs by the end of the year.
Loss of value
The former energy benchmark recently cut its dividend by 55% as a precaution. Suncor pays a dividend of 3.84%, although this is a high risk investment prospect. With falling oil prices and worsening global demand, Buffett could ditch Suncor next, as he rebalances his portfolio ahead of the next stock market crash.
The post Warren Buffett: Signals a Huge Market Crash Is Coming first appeared on The Motley Fool Canada.
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Foolish contributor Christophe Liew has no position in any of the stocks mentioned. The Motley Fool owns shares and recommends Berkshire Hathaway (B shares). The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC and recommends the following options: $ 200 long calls in January 2021 on Berkshire Hathaway (B shares), short $ 200 buys in January 2021 on Berkshire Hathaway (B shares) and short calls of 200 $ in September 2020 on Berkshire Hathaway (B shares).
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