Investors are drawn to tangible assets. It’s one of the reasons why real estate, despite its complexities as an investment asset (high cost of entry, active investment, etc.), always holds its allure. And even though stocks are backed by tangible assets as well, such as its property (both physical and intellectual), the underlying assets and its cash reserves, people don’t find them as “tangible.”
The reason is that they never get access to real assets. They only have numbers on a screen that tells them whether their partial ownership in the company is profitable or a loss. This is one barrier every good investor needs to cross, and think of stocks as more than just changing numbers. It allows them to analyze businesses efficiently and gives them pride in owning decent companies.
That’s what Warren Buffett means when he teaches investors to find profitable businesses and don’t chase short-term spikes and valuations. If a company is good and adheres to good business practices, the stock usually follows. Clearly, Warren Buffett sees the businesses he buys as tangible assets and looks beyond mere numbers, and that’s probably why he doesn’t like bitcoin.
When it comes to tangible assets, few other assets are as universally loved and accepted as gold. It holds its value and typically has a negative correlation with the market. Despite its tangibility and proven history, Buffett doesn’t really like gold. He considers the U.S. economy and the stock market a far better investment bet, especially over the long term.
Still, Buffett bought a mining company, which tells us that either his views about the gold is changing or this market crash really was too different from the previous economic fluctuations Buffett has seen over his illustrious career. Whatever the reasoning behind it, the fact remains that he bought gold, but he might never buy bitcoin.
Warren Buffett called gold many things but never “rat poison squared.” That’s a pejorative he used exclusively for bitcoin. His abhorrence for this particular crypto doesn’t come from the asset’s intangibility but also because it might not fit his definition of a good business. It’s something that has strayed quite far from the vision of its creator. It has become a highly volatile investment asset instead of becoming a borderless global currency.
Like Buffett, if you want to stay away from the bitcoin and would prefer adding gold to your portfolio, consider Kirkland (TSX:KL)(NYSE:KL). The stock has been declining for the last six months, which has made it very attractively valued. If you can buy the dip before the 2021 crash, which might catapult its valuation, you’d have a company in your portfolio that grew over 2400% (from lowest to peak valuation) during the last five years.
The company also pays dividends, and the current yield is 1.9%. If the stock keeps falling at its current trajectory, the yield would likely go up, but the chief attraction of this company is still its growth potential. It also has a geographically diverse operational portfolio and operates mines in both Canada and Australia.
Even if Warren Buffett doesn’t like gold per se, he likes it significantly better than the bitcoin, which can be an excellent reason to stay away from that particular asset. But that’s not the only reason. Bitcoin is highly volatile and has enormous capital growth potential, but it also requires you to be familiar with the cryptocurrency market. If you can’t make the bitcoin trades at the right time, it might become a very costly investment.
Speaking of Warren Buffett's opinion on gold and bitcoin...
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