Warren Buffett Sold This Canadian Stock: Now it’s Soaring!

Recently none other than Warren Buffett sold Suncor Energy (TSX:SU)(NYSE:SU) stock. Now it’s SOARING!

| More on:

Warren Buffett is an inspiration to countless investors.

His moves are studied by fans the world over, who copy his plays in order to capture a little bit of alpha for themselves.

Rumours that Buffett bought a given stock have been enough to send the stock soaring. And in general, those who bought Buffett’s favourite stocks have done well. The Berkshire Hathaway portfolio has risen by 20.8% annualized over the last 55 years–a phenomenal return. If you’d invested $10,000 with Buffett when he started out, you’d be a millionaire today.

That’s not to say Buffett is always right though. Every now and then the “Oracle of Omaha” has been known to make mistakes. He doesn’t make them very often, but when he does, it makes you stop and take notice. In this article, I will explore one stock that Buffett sold at a loss that has rallied since then.

Suncor Energy

Suncor Energy (TSX:SU)(NYSE:SU) is a stock that Warren Buffett started buying in the mid $40-$50 range. He bought it again when it was somewhere between $20 and $30 and later sold it when it was still in that range. So he sold out of the position at a loss.

Suncor is a stock that Buffett has bought and sold many times over the years. While Buffett likes to buy and hold long term, he’s not above trading here and there–Suncor is proof of that. His most recent flirtation with SU was a clear loser, but that doesn’t mean it was a loser for everyone who followed him into the trade. As of this writing, SU stock went for $29. In the first quarter, when Buffett sold, it went for anywhere between $21 and $29. Those who followed Buffett into his most recent Suncor purchase–around $25–would be up if they had held on until today.

Why it’s soaring

It’s not hard to understand why Suncor Energy stock is soaring. It’s an oil and gas company that makes money off gasoline sales. Crude oil is currently soaring, and gasoline is soaring even more. So the current state of the economy means big profits for Suncor Energy. That’s borne out in the company’s most recent quarterly earnings.

In the second quarter, Suncor did over $2 billion in cash from operations, $722 million in operating income, and $868 million in net income. In the same quarter in 2020, net income and operating income were both negative. So, the higher oil prices we’ve been seeing lately have been treating Suncor well.

One scenario to watch out for

Suncor Energy is in a good place today. With energy prices rising, Suncor Energy’s earnings and stock price are both on the upswing. As long as this situation persists, then SU will pass on plenty of value to shareholders.

Still, there’s one scenario investors will want to keep an eye on:

A decline in oil prices.

In the same way that higher oil prices have sent SU stock higher, lower oil prices could send it tumbling. In 2020, when oil prices were at rock bottom lows, SU delivered four quarters in a row of negative earnings. It even had to cut its dividend in half. If that happens again, SU is gonna tank. So beware of the price of oil. If it goes down again, Warren Buffett will look smart to have sold Suncor Energy stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button 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 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).

More on Dividend Stocks

Dividend Stocks

Top Canadian Stocks to Buy Right Now With $1,000

Investing in stocks is not about timing but consistency. If you have $1,000 to invest, these stocks offer an attractive…

Read more »

cloud computing
Dividend Stocks

Is Manulife Stock a Buy for its 3.5% Dividend Yield?

Manulife stock has been a long-time dividend winner, but the average has come down over the last few years. So…

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

This 7.5% Dividend Stock Pays Cash Every Single Month

Monthly dividend income can be a saviour, but especially when it provides passive income like this!

Read more »

jar with coins and plant
Dividend Stocks

2 High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These TSX stocks still offer attractive dividend yields.

Read more »

concept of real estate evaluation
Dividend Stocks

Invest $23,253 in This Stock for $110 in Monthly Passive Income

Dividend investors don’t need substantial capital to earn monthly passive income streams from an established dividend grower.

Read more »

Dividend Stocks

3 Mid-Cap Canadian Stocks That Offer Reliable Dividends

While blue-chip, large-cap stocks are the preferred choice for most conservative dividend investors, there are some solid picks in the…

Read more »

The letters AI glowing on a circuit board processor.
Dividend Stocks

Is OpenText Stock a Buy for Its 3.6% Dividend Yield?

OpenText stock has dropped 20% in the last year, yet now the company looks incredibly valuable, especially with a 3.6%…

Read more »

calculate and analyze stock
Dividend Stocks

How to Use Your TFSA to Earn $6,905.79 Per Year in Tax-Free Income

Put together a TFSA and this TSX stock, and you could create massive passive income from returns and dividends.

Read more »