Warren Buffett was never one to get caught up in the stock market hype. He has generally made much of his fortune investing in boring, undervalued, boring businesses. In fact, much of his investment career has been finding lost or forgotten market opportunities. Conversely, when markets are hot and speculative, Mr Buffett sits on the sidelines collecting cash for a future market crash.
Bitcoin does not pay dividends or produce anything
Perhaps this is why it has avoided (and encouraged others to avoid) popular trends like cryptocurrency and Bitcoin. In February of last year, he said “Basically cryptocurrencies have no value and do not produce anything. They aren’t reproductive, they can’t mail you a check, they can’t do anything, and what you hope is for someone else to come over and pay you more money later, but then there’s the problem that person. In terms of value: zero. ”
Basically, when you buy Bitcoin, like any boring commodity, one can only hope that demand outstrips supply. And yet, unlike a business, you cannot estimate Bitcoin’s value based on earnings / cash flow, management expertise, operational excellence, market benefits, or by the value of its balance sheet.
In fact, his point is a good reminder for all investments, not just for cryptocurrency. If you want to speculate a portion of your portfolio on Bitcoin, do it on all accounts. However, be prepared for huge volatility, follow the trade intensively, and get a quick trigger finger.
If you want to build millions like Warren Buffett, your best bet is to invest the old-fashioned way. First, find great public traders businesses with strong balance sheets, frank control, and steady / growing cash flow. Second, invest in them. Third, be patient and wait. Sometimes an investor’s best strategy is patience. As Warren Buffett said, “The stock market is a device for handing over money from the impatient to the patient.”
This Canadian stock reflects Berkshire Hathaway’s strategy
If you’re inclined towards a “turtle against the hare” investment strategy, then you need to consider owning Brookfield Asset Management (TSX: BAM-A) (NYSE: BAM). If there is any Canadian company that has exemplified Warren Buffett’s contrary approach to investing, it is BAM. It’s like the Berkshire Hathaway alternative assets.
BAM owns and manages one of the world’s largest diversified portfolios of real estate, infrastructure, renewable power, distressed debt, insurance and private equity assets. It takes institutional capital (pension funds, financial institutions, sovereign funds), acquires assets with little fuzz (debt distress, operational issues, or negative market bias), refinances them, and then injects capital and management expertise.
Next thing you know, they are very attractive assets that generate huge amounts of cash flow. These assets are either held for production or sold at a large profit to lower cost capital investors.
Currently a great time to become a BAM shareholder. With interest rates always at lows, BAM is able to refinance its assets and lock in historically high yield spreads. Similarly, with bonds earning virtually no yield, institutions flock to BAM to help meet their income targets. Finally, with a great deal of economic uncertainty, there will certainly still be opportunities to acquire value over the next few months and years.
Make this stock count as Warren Buffett would
Combine these factors, and BAM could double its fee-bearing capital and earnings over the next five years. Today, the stock is at an even valuation that Warren Buffett would love. It trades between a 20% and 25% discount to the net asset value and to most analysts’ price targets. Given this opportunity, I’d rather forget Bitcoin and grab a million dollar stake in one of Canada’s best businesses.
Speaking of opportunities to make millionaires …..
This Tiny TSX Stock Could Be The Next Shopify
One unidentified Canadian IPO has doubled its value in just a few months, and renowned Canadian stockbroker Iain Butler sees a potential millionaire maker waiting …
Because he thinks this fast-growing company looks a lot like Shopify, a stock that Iain officially recommended 3 years ago – before it scoured 1,211%!
Iain and his team have just published a detailed report on this small TSX stock. Find out how you can access the Shopify NEXT today!