When investing guru Warren Buffet buys a stock, the investment community at large pays close attention. Buffet’s Berkshire Hathaway group has made a considerable amount of money for its shareholders across the past 50+ years. Buffet has a proven track record of selecting elite publicly traded companies at low prices and riding them to the promised land. In fact, Berkshire’s aggregate return stemming back to the 60s is nearly 140 times greater than the return of the S&P 500 across the same period of time.
Buffet is now a Gold Bull
Buffet purchased a gold mining stock this past quarter in Barrick Gold (NYSE: Gold). All in all, the position’s value is just under $565 million, meaning Barrick Gold is one of Berkshire’s top investments this year. Buffet’s decision to invest in gold is notable as he has been a gold bear for years. In particular, Buffet has frowned upon owning the physical metal yet has not closed the door on purchasing gold stocks and ETFs. Though Buffet claims physical gold lacks utility, the truth is it serves myriad practical purposes. However, what matters most is the fact that Buffet has finally hopped on the gold bandwagon.
The Inside Scoop on Barrick Gold
Barrick Gold has sold more than $1 billion of assets in an attempt to decrease its debt. By the end of June, Barrick Gold’s debt load decreased nearly 25%. However, the rise in the price of gold combined with the company’s newfound leverage should empower Barrick executives to use additional cash flow to enhance the balance sheet and draw even more investor attention.
Barrick’s free cash flow exceeded $520 million this past quarter alone. This is quite the considerable increase from the $84 million from the first-quarter. Crunch the numbers and it becomes clear Barrick Gold is on pace for free cash flow of $700 million by the end of the third-quarter in 2020. However, if gold moves beyond $2,000 per ounce, the free cash flow figure will be even higher. In other words, Barrick Gold qualifies as a true value stock with a meaningful competitive advantage sheerly based on the company’s size alone. This is precisely why Buffet established a position in the stock.
Where Does Barrick Gold go From Here?
Both short-term and long-term investors alike are wondering where Barrick Gold will go from this point forward. Though Barrick’s price is largely tied to that of gold, the value of the precious metal does not completely dictate the stock’s fate. Take a look at StockNews’ POWR Ratings for GOLD and you will find it has A grades across each of the POWR Components but for its Industry Rank grade of B. All in all, StockNews has GOLD ranked second of 30 stocks in the Miners – Gold category.
Check out the top analysts’ forecasts for GOLD on TipRanks and you will be impressed with their expectations. These analysts insist GOLD should be priced at $31.96, meaning the stock has around 10% upside remaining. In other words, it appears as though Buffet is right once again. Every serious investor should consider adding GOLD to his or her portfolio in unison with Buffet and holding for the long haul.