News broke on Saturday that Berkshire Hathaway (NYSE: BRK.B), Warren Buffett’s company, had bought 20.9 million shares of Barrick Gold (NYSE: GOLD).
Buffett’s move gained attention for several reasons.
The Oracle of Omaha is famous for his aversion to gold. He once said that the precious metal “doesn’t do anything but sit there and look at you”. In short, unlike a farm, gold does not produce anything.
At the same time, there has been a rush towards the shiny metal as the US dollar weakens.
But with everything that Buffett does, context matters.
The Barrick Gold position is estimated to be worth around US$560 million, which is a sizable sum of money.
However, Berkshire Hathaway’s stock portfolio is worth north of US$241 billion.
Therefore, the position amounted to a little more than 0.2% of the company’s overall stock holdings. That is, the company’s position in Barrick Gold wouldn’t be moving the needle anytime soon.
In contrast, the company’s largest position is actually in Apple (NASDAQ: AAPL), which currently represents 48% of the total pie.
Beyond that, there is the question on who actually made the move.
Not the only investor
Berkshire Hathaway’s buys in the stock market are closely watched as they are often seen as a reflection of Buffett’s actions.
However, the Oracle is not the only person making the decisions at Berkshire Hathaway these days.
In 2011, Berkshire Hathaway hired Todd Combs as an investment manager.
Following that, Ted Weschler joined the revered company in 2012. In the same year, Buffett said that the duo will take charge of a portfolio worth US$5 billion each.
As such, smaller positions within the portfolio could well be decisions made by either Combs and Weschler — and not by Buffett.
A 0.2% position does seem to fit that bill.
All that glitters
Finally, it’s important to know that an investment in Barrick Gold is not the same as buying physical gold itself.
The company owns gold and copper mining operations in 13 countries in North and South America, Africa, Papua New Guinea and Saudi Arabia.
While gold prices will play a sizable role in Barrick Gold’s profit, there is no guarantee that an investment will gain or lose according to the shiny metal’s price.
Bonus fact: an investment in gold miners may not always correlate with gains made on gold prices.
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Disclosure: Chin Hui Leong owns shares in Berkshire Hathaway and Apple.
