Warren Buffett Did What?!?
One piece of news from last week that certainly helped gold early this week was that Berkshire Hathaway invested in Barrick Gold. Yes: Warren Bufffet, a loud and longtime gold detractor, invested US$565 million in the world’s second largest gold miner.
Buffett is a value investor. He has said many times that gold is unproductive, unpredictable, and useless. So news of this move certainly took the market by surprise.
Lots of points to make:
- Gold producers are standing out among equities for strong balance sheets and earnings forecasts. That suggests Buffett sees Barrick as a value play. He doesn’t have to think that gold is going to the moon – as long as he thinks gold prices will remain strong for several years, then Barrick is a value buy.
- Taking that one step further: gold companies might now be in the early stages of being thought of as real businesses. A history of poor capital allocation plus a commodity with wide price swings has segmented gold miners to the side, as a niche sub-sector not to be trusted. But in the last bear market and in the sideways years since gold miners have largely said
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