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Highlights
- Canadian investors can invest in certain TSX stocks to recreate Warren Buffett's portfolio.
- Royal Bank and BCE have been paying dividends since 1987.
- IMO stock galloped by almost 83 per cent in nine months.
When looking to invest like veteran investor Warren Buffett, one can focus on a long-term approach. It is generally believed that Mr Buffett looks for companies with stable historical performance, sound growth prospects and solid balance sheets, and once bought, he rarely trades them in.
Canadian investors who are looking to emulate Mr Buffett’s strategies can find it to be a daunting task to exactly follow his portfolio as he primarily deals in US stocks. However, they can explore TSX stocks with similar characteristics to recreate a Canadian version of Warren Buffett's portfolio.
Here are five TSX stocks from different sectors that Canadian investors can explore to invest like Mr Buffett.
1. Royal Bank of Canada (TSX: RY)
The diversified financial company has said that its total provision for credit losses (PCL) was reduced by C$ 246 million year-over-year (YoY) to a negative 342 million in Q2 FY2022. The bank also improved its Common Equity Tier (CET) 1 ratio by 40 basis points to 13.2 per cent in the latest quarter compared to Q2 FY2021.
The large-cap company has had a steady track record of paying dividends since 1987. Royal Bank saw its stock prices zoom by about 143 per cent in the last 10 years. As per EODHD/Others data, RY seems to be on a downward trajectory as its stock has been recording lower highs and lower lows since the beginning of 2022.
Also read: 2 TSX income stocks to buy for long term: Fortis (FTS) and BMO
2. BCE Inc (TSX: BCE)
BCE too has been rolling out dividends since 1987. The Canadian telecom company held a dividend yield of nearly six per cent. This was slightly high from Berkshire's Verizon Communications’ (NYSE: VZ, VZ: US) dividend yield of about five per cent.
BCE has announced its plans to roll out its 5G network services nationwide across urban and rural markets, starting from Toronto, which reflects its business expansion plans.
BCE scrip delivered a return of roughly 50 per cent in 10 years. This telecom stock was down by over 16 per cent from its 52-week high of C$ 74.09 (April 20). According to EODHD/Others data, BCE seems to be on a bearish trend with a Relative Strength Index (RSI) of 21.79 on June 17.
3. Imperial Oil Limited (TSX: IMO)
Imperial Oil is an integrated oil and gas company with a market capitalization exceeding C$ 40 billion. Imperial's return on equity (ROE) was over 15 per cent, similar to Buffett's oil stock holdings of Chevron (NYSE: CVX, CVX: US).
According to the US Generally Accepted Accounting Principles (GAAP), the Canadian oil company posted a net profit of C$ 1.17 billion in Q1 2022 as compared to C$ 392 million in Q1 2021.
IMO stock galloped by almost 83 per cent in nine months, and its RSI value fell to 37.12 on June 17, signalling a downward trend.
Also read: 2 TSX summer stocks to buy for July: Transat (TRZ) and Cineplex (CGX)
4. Saputo Inc (TSX: SAP)
Warren Buffett's portfolio includes Kraft Heinz (NASDAQ: KHC, KHC: US) from the consumer packaged goods sector. Investors in Canada can explore Saputo Inc as an alternative option to expand exposure to the consumer sector.
Saputo is a Canadian dairy company with operations across Canada, the US and the UK. The C$ 11-billion market cap company held a price-to-earnings (P/E) ratio of 33.33, which was close to that of 35.9 posted by Kraft Heinz.
The Canadian dairy processor is scheduled to deliver a quarterly dividend of C$ 0.18 per share on June 28.
5. Molson Coors Canada Inc (TSX: TPX.B)
Molson Coors is a beverage company brewing and distributing beer and malt beverages. The Canadian consumer company saw its net sales grow by 16.7 per cent YoY in Q1 2022. The C$ 14-billion market cap company posted an 80.1 per cent surge in its US GAAP net profit in the latest quarter compared to a year ago.
Warren Buffett holds stocks of non-alcohol company Coca-Cola (NYSE: KO, KO: US), with a dividend yield of nearly three per cent, which is close to that of Molson Coors.
TPX stock rose by over 15 per cent in six months and had an RSI value of 44.14 on June 17, according to EODHD/Others.
Bottomline
The macroeconomic environment seems to be impacting the TSX stocks mentioned above. However, considering their general and historical characteristics, these Canadian stocks can likely outlast in the long run and help investors recreate a version of Mr Buffett’s portfolio in Canada.
Please note, the above content constitutes a very preliminary observation based on the industry, and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
