The entire investing community eagerly waits for Warren Buffett’s annual letter to Berkshire Hathaway shareholders. This time it was even more special as the Oracle of Omaha amazed all by his unexpected bets during the pandemic.
Many investors have made fortunes by following Buffett’s advice on investing principles and imitating his actions. While he made some unconventional bets during the last year, his long-term investing thesis remains constant.
As per the latest 13F filing of Berkshire Hathaway, the company is betting big on 5G. More importantly, it is diversifying on the emerging technology by playing on two potential beneficiaries: T-Mobile and Verizon. While T-Mobile could see significant gains due to its expanded customer base and 5G, Verizon’s juicy yield might have attracted Buffett.
Warren Buffett is widely popular for his stock-picking skills. He did not act much during the pandemic crash last March, which was a surprise for many. However, he seems to have turned active recently amid the hopes of normalcy.
Canadian investors can consider BCE (TSX:BCE)(NYSE:BCE) to play the 5G rally. BCE resembles Verizon in many aspects. Its dividend yield of 6.4% even beat Verizon’s and offers a low-risk investment proposition.
BCE is the country’s biggest telecom company by market cap and the second biggest by subscriber base. It intends to invest more than $2 billion this year on network improvement and 5G expansion. The heavy capital outlay could result in superior earnings growth for the next few years.
Telecom companies earn stable revenues irrespective of the economic environment. That’s why investors prefer these defensives during recessionary times.
BCE stock looks attractive mainly because of its stable dividends and growth prospects related to 5G.
Investors can also consider Rogers Communications (TSX:RCI.B)(NYSE:RCI) to bet on 5G. It offers a dividend yield of 3.6%, in-line with TSX stocks at large. It has a widespread 5G coverage in the country and is leading the race among peers.
Buffett, the most celebrated investor of our times, has always believed in America’s growth story. In the 2020 annual letter, he emphasized this belief and reaffirmed not to bet against America. Based on this belief, Berkshire Hathaway has long been investing in the S&P 500 ETFs.
Apart from investing in individual stocks, Buffett is a solid admirer of index funds. Though these represent a small portion of its entire portfolio, it highlights his focus on diversification.
Index funds are a collection of stocks that give exposure to the entire market. Instead of picking individual top-performing stocks, index funds give a united, diversified representation. They generate decent wealth over time along with reasonable safety.
If Canadian investors want to imitate the S&P 500 returns, they should consider iShares Core S&P 500 Index ETF (TSX:XSP) (CAD hedged). You will get exposure to the biggest companies like Apple, Facebook, Amazon, and many others with this index fund.
Index funds are particularly appealing for new investors. The stock-specific risk gets diversified, and you get exposure to entire markets at once. XSP fund has returned almost 250% in the last decade, more than double the TSX Composite Index.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned. David Gardner owns shares of Amazon, Apple, and Facebook. Tom Gardner owns shares of Facebook. The Motley Fool owns shares of and recommends Amazon, Apple, Berkshire Hathaway (B shares), and Facebook. The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV, T-Mobile US, and Verizon Communications and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), short March 2021 $225 calls on Berkshire Hathaway (B shares), long January 2022 $1920 calls on Amazon, short January 2022 $1940 calls on Amazon, and long January 2023 $200 calls on Berkshire Hathaway (B shares).
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