Business & Investment

What’s behind Warren Buffett’s Barrick Gold position?

Decision to take Warren Buffett’s position Barrick gold (TSX: ABX)(NYSE: GOLD) Surprised many people.Indeed, Omaha’s Oracle has been quite vocal about him. I hate precious metals As an investable asset class. After all, the pile of gold isn’t very productive — it’s just sitting there. But companies can generate more and more goods and value. This value-creating aspect of investment is the key to investment that Buffett usually focuses on.

I think Warren Buffett thought about the difference between gold mining and gold itself.

Gold miners continue to be undervalued

Whether you like gold or other precious metals as an investment, gold mining is a different story. As with any other product in high demand, the supply side of the equation is important. Buffett has been involved in a variety of commodities and commodity-related businesses for many years, whether they are oil producers or homebuilders. Gold production is the key to maintaining a healthy supply of precious metals to the market.

Gold has industrial uses and is used in a variety of downstream jewelery and other value-added products. But this is primarily the speculative glossy metal that people hold as a valuable store. The price of this shiny metal can fluctuate like any other product. At least for me, it’s no wonder that gold really makes no difference if Buffett can make big bets in other commodity sectors. Barrick is a price taker, and its revenue really depends on how well the mining work is managed.

This is where gold miners have failed in the past. In the bull market of gold in the past, miners have taken on large debts, acquired deposits at unreasonably high prices, and have collectively found ways to avoid this sector from a balance sheet perspective. Today, gold miners have been trading at record lows compared to gold prices for about 30 years. Currently, in companies like Barrick, purchased treatises are powerful. So you can see why Buffett chose this company as a recent portfolio addition.

Why Barrick is a great choice

Barrick has done a great job of building a lasting competitive advantage (or “moat”) in the industry. This is one of Warren Buffett’s talks about investment standards in the past. Barrick’s gold reserves have become the world’s leading gold company for large-cap long-term investors to consider gold bullishly.

Whether or not he thinks gold is undervalued, Barrick now makes a compelling claim. Of course, the fact that Warren Buffett has set foot in this Canadian mining company makes the stock even more attractive. Indeed, I like the size of the company, its fundamentals, and the blessings it received from one of the greatest investors ever.

Do you like this Warren Buffett-approved pick? Here’s a little more I think he might like:

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Stupid contributor Chris Macdonald There are no positions in any of the listed stocks.

What’s behind Warren Buffett’s Barrick Gold position? What’s behind Warren Buffett’s Barrick Gold position?

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