The COVID-19 pandemic has sparked a historical economic crisis. In these times, many investors are looking for guidance. Warren Buffett has cultivated a well-earned reputation as a legend in this arena. Moreover, his boundless optimism for the U.S. and global economy is always infectious. Today, I want to explore how investors can look to emulate Buffett to kick off the month of September.
Warren Buffett is betting on banks In August, I’d discussed one of Warren Buffett’s favourite economic indicators. The so-called Buffett Indicator takes the combined market capitalizations of publicly traded stocks worldwide and divides the figure by global gross domestic product (GDP). In the late summer, that indicator has read more than 100%. This suggests that the market is overvalued right now.
Regardless, Warren Buffett has been aggressive in stashing one top bank in the United States. He has added to Berkshire Hathaway’s holdings in Bank of America (NYSE:BAC) but has looked to sell millions in Goldman Sachs (NYSE:GS), Wells Fargo (NYSE:WFC), and JPMorgan (NYSE:JPM) stock. Investors may be confused by these moves, but it is perfectly in line with Buffett’s value investing strategy. The good news is several top Canadian banks offer even more attractive value than Bank of America right now.
Bank of Montreal is the fourth largest of the Big Six Canadian banks. Its shares have dropped 15% in 2020 as of close on September 2. The stock last had a price-to-earnings (P/E) ratio of 11 and a price-to-book (P/B) value of one. This puts BMO stock in favourable value territory relative to industry peers. Better yet, it last paid out a quarterly dividend of $1.06 per share. This represents a strong 5.1% yield.
It doesn’t hurt to go for gold Warren Buffett shocked the investing world when it was revealed that Berkshire Hathaway (NYSE:BRKa) had added over $500 million in Barrick Gold stock. Buffett has been a skeptic when it comes to the yellow metal. However, gold has soared to record highs in 2020. The company still has a small holding relative to its other top equities. However, this illustrates gold’s momentum and the qualify of Barrick stock.
Shares of Barrick have climbed 61% so far this year. The stock still offers a favourable P/E ratio of 11 and a P/B value of 2.4. Moreover, this top gold producer possesses an excellent balance sheet. Investors who want exposure to gold should feel good about following in Warren Buffett’s footsteps with Barrick.
One more Warren Buffett-approved stock Following with Warren Buffett’s value investing model, we should aim to target sectors that are undervalued in addition to stocks. Restaurants have been put through a very challenging period due to the COVID-19 pandemic. However, fast-food operators have been in a stronger position compared to their peers.
Restaurant Brands International owns and operates three major chains; Burger King, Tim Hortons, and Popeyes Louisiana Chicken. Shares of RBI have dropped 8.1% in 2020. The company last announced a quarterly dividend of $0.52 per share, which represents a 3.7% yield. Shares of RBI last had a P/E ratio of 27, which puts it in above-average value territory relative to industry peers.
The post Warren Buffett: Where to Invest in September appeared first on The Motley Fool Canada.
Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short September 2020 $200 calls on Berkshire Hathaway (B shares).
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