Canada markets close in 14 minutes
  • S&P/TSX

    -383.36 (-1.87%)
  • S&P 500

    -91.97 (-2.07%)
  • DOW

    -736.05 (-2.13%)

    -0.0033 (-0.42%)

    -1.37 (-1.90%)

    -5,387.97 (-8.78%)
  • CMC Crypto 200

    -46.45 (-4.09%)

    +11.40 (+0.65%)
  • RUSSELL 2000

    -70.55 (-3.15%)
  • 10-Yr Bond

    -0.0610 (-4.45%)

    -398.37 (-2.65%)

    +6.69 (+32.15%)
  • FTSE

    -59.73 (-0.86%)
  • NIKKEI 225

    +176.75 (+0.58%)

    -0.0029 (-0.43%)

Worried About Inflation? Listen to Warren Buffett’s Advice From 2009

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
close-up photo of investor Warren Buffett
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Canadians should care about inflation, because the rising cost of living could alter buying habits. The price growth slowed down in June 2021 to 3.1%, although it’s still higher than the Bank of Canada’s target.

Governor Tim Macklem assured folks the central bank is firmly in control. It will use available tools to keep inflation in check, even if temporary spikes look to become a permanent problem. CIBC senior economist, Royce Mendes, likewise thinks any upward fluctuation is temporary.

What would Warren Buffett do?

Inflation was a major concern, too, in 2009 following the 2008 financial crisis. Policymakers had rescue plans similar to the stimulus packages today. The GOAT of investing, Warren Buffett advised investors then that one course of action to protect against inflation is to own a part of “a wonderful business.”

The Berkshire Hathaway chief said the business’s product will still be in demand regardless of what happens to the value of the U.S. dollar. Instead of overreacting, Buffett keeps a long-term mindset when investing. Moreover, he believes that asset-light companies overcome inflation best because they can raise prices and scale easily.

Masterful comeback

Warren Buffett held Restaurant Brands International (TSX:QSR)(NYSE:QSR) for a long time until the outbreak of coronavirus in March 2020. The legendary investor sells stocks if a business fundamentally changes or if he loses faith in management. He sold this restaurant stock for fear that store shutdowns would kill the business.

However, the franchisor of Burger King, Tim Hortons, and Popeyes endured the crisis. RBI’s share price tanked to $39.24 on March 18, 2020, yet ended the year 96.71% higher than its COVID low. Thus far in 2021, the restaurant stock trades at $85.12 (+10.27%) and pays a decent 3.29% dividend.

RBI’s CEO José E. Cil said the earnings results in the first two quarters of 2021 show the quick-service restaurant chain has returned to growth.

Solid growth fundamentals

Like RBI, Suncor Energy (TSX:SU)(NYSE:SU) was a fixture in Berkshire’s stock portfolio. Canada’s oil sands king was a losing proposition in 2020, as investors lost 47.7%. Management also slashed dividends by 55% after Q1 2020. Buffett might have underestimated Suncor when he dumped his entire holdings in Q1 2021.

Thus far, in 2021, energy is the TSX’s top-performing sector. Fortunately, too, Berkshire’s sudden exit had minimal impact on the energy stock. As of July 30, 2021, Suncor investors have enjoyed an 16.59% year-to-date gain. At $24.56 per share, the $37 billion integrated energy company pays a 3.37% dividend.

Market analysts believe that Suncor maintains solid growth fundamentals following two consecutive quarters of profit. They forecast the energy stock to outperform this year, with a 54.50% return potential in the next 12 months. Buffett may have lost confidence in the oil and gas sector bellwether, but Canada’s largest pension funds have not.

The Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers’ Pension Plan (OTPP), along with three other top pension funds, collectively increased their investments in oil sands producers by 147% in Q1 2021 compared to Q1 2020.

Sound advice

Buffett’s advice on dealing with inflation is sound. However, dumping the Canadian stocks could be two of his investing mistakes. The companies emerged stronger from the pandemic and reported robust earnings in Q1 and Q2 2021.

The post Worried About Inflation? Listen to Warren Buffett’s Advice From 2009 appeared first on The Motley Fool Canada.

Today only: $200 off our top stocks for the “T288 era”

We now believe that a game-changing announcement by Apple in a matter of weeks could launch nothing less than a whole new era of technology.

With estimates believing this era could grow to US$7 trillion in annual sales — that’s 8x BIGGER than last year’s e-commerce sales…

The Motley Fool has produced a full investing plan to try taking full advantage of what Deloitte calls “the next digital transformation.”

And until midnight tonight — you can take US$200 off a VIP membership!

Learn more

More reading

Fool contributor Christopher Liew 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 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares).


Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting