Microsoft Corp. (ticker: MSFT) co-founder Bill Gates keeps on stacking cash in his foundation’s portfolio.
The Bill & Melinda Gates Foundation Trust’s investment portfolio is worth $42.3 billion as of Dec. 31, according to the trust’s latest 13F filing with the Securities and Exchange Commission on Feb. 14. That’s up from $38.9 billion as of Sept. 30.
What changed with the Gates Foundation Trust’s portfolio in the last three months of 2023? The trust pared a few top holdings and added one position worth $10.2 million: 124,333 shares of Veralto Corp. (VLTO), an industrial sector stock specializing in environmental solutions.
[Sign up for stock news with our Invested newsletter.]
“Gates’ portfolio is an intriguing mix of old and new economy sectors, showing a smart diversification strategy,” says Deiya Pernas, chartered financial analyst and co-founder of Pernas Research in San Juan, Puerto Rico. “The Gates portfolio has significant investments in artificial intelligence, tech, as well as crucial sectors like transportation and waste management, which are closely tied to the economy, as well as holdings in companies like Berkshire Hathaway, providing exposure to insurance and energy sectors.”
Given the portfolio’s formidable account figure and the fact that 96% of its assets are concentrated in the top 10 holdings, it’s become common for portfolio managers to stick to the script and not deviate too much from what got Gates to where he is today.
“Managing a $40 billion equity portfolio is like navigating a massive ship,” Pernas says. “Every move is heavily deliberate. Gates’ portfolio focuses on companies with solid fundamentals rather than opportunistic strategies focusing on valuation. The recent adjustments, like those in Microsoft and Berkshire, are minor and don’t indicate a major strategy shift.”
Here’s an updated view of the top stocks in the Gates Foundation Trust’s portfolio as of Dec. 31:
| STOCK | % OF PORTFOLIO | MARKET VALUE OF SHARES |
| Microsoft Corp. (MSFT) | 34% | $14.4 billion |
| Berkshire Hathaway Inc. (BRK.B) | 16.8% | $7.1 billion |
| Canadian National Railway Co. (CNI) | 16.3% | $6.9 billion |
| Waste Management Inc. (WM) | 14.9% | $6.3 billion |
| Caterpillar Inc. (CAT) | 5.1% | $2.2 billion |
| Deere & Co. (DE) | 3.4% | $1.4 billion |
| Ecolab Inc. (ECL) | 2.5% | $1 billion |
Microsoft Corp. (MSFT)
Microsoft is far and away the cleanup hitter in Gates’ all-star lineup. It comprises 33.98% of the portfolio and has a market capitalization of nearly $3 trillion in early 2024, and its one-year return is nearly 60% as of mid-February.
The portfolio managers cut the trust’s MSFT allotment by 2.7% in the fourth quarter of 2023, but that’s likely some late-year pruning to stay in line with the portfolio’s long-term objectives. MSFT shares are up by 7.3% in 2024 as of Feb. 20, keeping pace with its “Magnificent Seven” tech peers. Its $13 billion investment in OpenAI, creator of the red-hot ChatGPT artificial intelligence chatbot, got a boost in February with new generative AI training models and the release of Sora, OpenAI’s new AI tool that turns simple text descriptions into clear and crisp one-minute digital videos.
The company has also routed OpenAI’s artificial intelligence features into a bevy of its computing platforms, including Word, Azure, Excel and Microsoft 365, signaling a major company shift into one of the fastest-growing technologies of the century.
Investors, Gates included, have reason to like what they see with MSFT stock. For instance, OpenAI reported in mid-February that it’s now at an $80 billion valuation. Microsoft’s net income increase of 33% and revenue growth of 18% in the most recent quarter are significantly ahead of its software industry competitors, adding another feather to this technology giant’s large cap.
Portfolio weight: 34% Market value of shares: $14.4 billion
[See: 9 Dividend Aristocrats to Buy Now.]
Berkshire Hathaway Inc. (BRK.B)
The Gates Foundation Trust continued its recent pattern of curbing its Berkshire shares, cutting its BRK.B position by 11.6% in the fourth quarter of 2023. The trust sold 2.6 million shares of one of its historically favorite companies in the third quarter as well, or 10.4% of its BRK.B allocation. (Gates and Berkshire Hathaway founder Warren Buffett happen to be longtime friends.)
The stock has risen by 14.2% over the past year as of Feb. 20, trailing the 22% return of the S&P 500 during the same period. That’s somewhat of an aberration for Berkshire Hathaway, which historically has matched S&P 500 returns over the past 20 years.
Berkshire made news recently when it cut its Apple Inc. (AAPL) holdings by 1.1%, or 10 million shares, in the final quarter of 2023, leaving a 5.9% stake worth about $174 billion in cash. AAPL stock has grown to a whopping 50.1% of Berkshire’s portfolio, and the cut was likely a rebalancing act, as the percentage of the overall portfolio allocated to Apple as of Dec. 31 was actually 0.05% higher than in the third quarter.
Defensive positions are part of the Gates Foundation Trust’s portfolio, and Berkshire fits in that regard. Suppose the economy continues to struggle and stocks wilt. In that case, Berkshire Hathaway is the kind of defensive stock that a prominent investor like Gates can find shelter in during stormy market periods.
Portfolio weight: 16.8% Market value of shares: $7.1 billion
Canadian National Railway Co. (CNI)
This north-of-the-border transport company has had a relatively quiet 2024, returning only 2.2% to shareholders so far this year, although it has returned 12.9% over the past three months. The Gates portfolio allocation stood pat for CNI shares in the fourth quarter.
Oil prices have risen more than 7% since the start of the year, to nearly $78 per barrel, putting pressure on the railway’s margins. Canadian National Railway acknowledged its common shareholders’ loyalty with a 7% dividend hike recently.
The railway mainstay also issued fourth-quarter results on Jan. 23, reporting revenues of 4.5 billion Canadian dollars ($3.3 billion), which bested analyst estimates, even though revenues slid by nearly 2% year over year.
The Gates trust has owned Canadian National since 2013, building a sizable position in the stock over the past decade. Overall, the trust boosted its stake in the Montreal-based company from 8.6 million shares in 2013 to 54.8 million as of Dec. 31. At 16.3% of the total portfolio, CNI is the third-largest stock position, and it also brings a 2% dividend yield to the table.
For Gates, the railway company represents a healthy dose of stability in North America’s robust commercial train transport marketplace, with 20,000 miles of rail touching the U.S. East and West coasts and the Gulf of Mexico. Don’t expect that scenario to change anytime soon.
Analysts aren’t exactly bullish on CNI stock, with J.P. Morgan’s Brian Ossenbeck keeping his “hold” rating with a 12-month price target of $121 per share, compared with CNI’s Feb. 20 closing price of $128.01. Scotiabank was a bit more upbeat, with a hold rating of $128 per share, but this is more of a long-term play.
Portfolio weight: 16.3% Market value of shares: $6.9 billion
Waste Management Inc. (WM)
At 14.9% of the total portfolio, Waste Management is the fourth-largest stock component in the Gates trust. Company shares have taken off since mid-2023, as WM is up roughly 14% on a year-to-date basis as of mid-February and more than 34% over the past year.
The company has come a long way from its core trash-removal and landfill-management beginnings. Waste Management has become a leading light in the green energy movement. It’s known for its burgeoning network of recycling centers and its landfill gas conversion technology that turns waste into an energy source. That’s good for the environment, but it’s also good for Waste Management: It allows the company to resell the gas it draws from its landfills, giving the company another rising profit center.
The company stands out as a titan in a recession-proof industry (WM has a 24% market share), and it just handily outperformed on fourth-quarter numbers, with Q4 revenue of $5.2 billion (5.7% annual growth) at a company record high.
Waste Management also plans to raise its dividend in March, marking 21 consecutive years of dividend growth. For now, WM’s dividend yield of 1.4% sweetens the deal for income-minded investors in early 2024.
Portfolio weight: 14.9% Market value of shares: $6.3 billion
[Seed Capital: How to Invest in Farmland as a Portfolio Diversifier]
Caterpillar Inc. (CAT)
This farm and agricultural construction machinery titan is on a roll these days, with share returns of 8% on a one-month basis and about 32% in the past year as of Feb. 20.
The land-moving company is finally seeing the fruits of the $1 trillion in infrastructure funds greenlit by Congress in November 2021 that support manufacturing, construction and industrial activity, where CAT excels.
In its last earnings report in early February, Caterpillar pegged earnings per share for Q4 at $5.23, up 35% from the same period in 2023. That was well ahead of analyst estimates of a $4.76 EPS for the quarter.
The company also said its first quarter of 2024 would be “broadly similar” to 2023 Q1 results. Its order backlog was stacked at $27.5 billion at the end of 2023, according to the company’s 10-K filing, providing more proof that the company is out of its early 2023 doldrums and looking to cash in on an improved housing construction market and the lucrative infrastructure pipeline over the next few years.
Like his friend and mentor, Warren Buffett, Bill Gates likes industry leaders who can keep growing and delivering dividends. With a 1.7% dividend yield and big infrastructure profits on the horizon, Caterpillar is set to bulldoze the competition for the remainder of 2024.
Portfolio weight: 5.1% Market value of shares: $2.2 billion
Deere & Co. (DE)
The most recent quarter found the Gates Foundation Trust in selling mode on Deere & Co., as it made a 9.2% cut in its DE holdings.
The farm- and heavy-construction machinery company still stands at 3.4% of the Gates portfolio, though the position’s cash value slid to $1.4 billion in Q4.
A big part of the issue with Deere is performance, as the stock has continued its 2023 slide into the new year. Deere’s share price is down about 11% on a year-to-date basis as of mid-February, having lost 8% in the past month.
The company caught a mild boost with a January announcement that Elon Musk’s SpaceX and Starlink satellite service will provide internet connections to Deere’s massive fleet of tractors, harvesters and crop sprayers. Yet Deere continues to see lower demand for construction equipment due to a lackluster real estate and commercial building market environment, even as the sector has shown signs of life in the first two months of 2024.
Deere’s most recent quarterly earnings performance, released in early February, was a mixed bag, as net income fell by 11% to $1.75 billion for the quarter, although Deere still holds ample cash reserves of $5.1 billion. Analysts still largely favor Deere making a comeback in 2024, with a consensus analyst 12-month target price of $420.94 per share that represents an 18.4% upside, according to data from TipRanks.com.
D.A. Davidson’s Michael Shlisky recently maintained a “buy” rating on Deere, with a $483 price target. The stock closed at $357.38 per share on Feb. 20. Company dividend payouts have risen moderately over the past three years (DE’s forward dividend yield is 1.65% today).
Deere is also entrenched in the reliable construction and farming industries, where demand may wane but usually comes back around.
Portfolio weight: 3.4% Market value of shares: $1.4 billion
Ecolab Inc. (ECL)
The Gates trust made no trades on Ecolab during the last quarter of 2023, but ECL stock continues to outperform, up nearly 9% so far in 2024. Ecolab also fits Bill Gates’ worldview, with an emphasis on green energy.
Ecolab specializes in sustainable water, hygiene, and energy technology and services. All told, industry analysts take a mixed view on the stock, with a “hold” consensus and a price target of about $223 per share, which is about 3% higher than ECL’s closing share price of $216.39 on Feb. 20.
The company has proven to be a reliable earner, outperforming nearly 60% of its sector in the past nine years, according to GuruFocus. The company reported fourth-quarter earnings per share of $1.55, up 22% year over year, with total revenue up 7.3%, to $3.9 billion. Topping out at $15.3 billion in 2023, full-year revenues rose 7.6%.
The company’s decision to expand its investment in digital technologies and AI should also boost productivity and catch the eye of tech-savvy investors like Gates.
Customer diversity is another selling point, as Ecolab’s menu of cleaning and sanitation products is a big seller in areas like health care, hospitality and industrial markets, ensuring a pipeline of cash throughout periods of economic uncertainty.
Portfolio weight: 2.5% Market value of shares: $1 billion
More from U.S. News
8 Best Warren Buffett Stocks to Buy in 2024
Invest Like a Billionaire: When to Sell Single Stock Positions
7 Top Investment Firms Using AI for Asset Management
Bill Gates Portfolio: 7 Best Stocks to Buy Now originally appeared on usnews.com
Update 02/21/24: This story was previously published at an earlier date and has been updated with new information.
