The Bill & Melinda Gates Foundation Trust’s investment portfolio was worth $45.9 billion at the end of the first quarter, up 8.5% from the $42.3 billion recorded at year-end, according to the trust’s latest 13F filing with the Securities and Exchange Commission on May 15.
In addition to making lucrative gains, Microsoft Corp. (ticker: MSFT) co-founder Bill Gates’ trust also made some interesting tweaks to his mainstay investment portfolio in the first quarter of 2024, though the lineup mostly stayed the same.
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The portfolio is overweight in four stocks: MSFT, Waste Management Inc. (WM), Berkshire Hathaway Inc. (BRK.B) and Canadian National Railway Co. (CNI), which combined make up 81.5% of the trust’s portfolio. Although the Gates trust trimmed two of its top positions in Q1, MSFT and BRK.B, 96.6% of the portfolio’s assets remain concentrated in the top 10 holdings. That shows the portfolio managers are sticking to the script and, aside from two “sell” positions at the top end of the portfolio, there were no other changes made in the first three months of the year.
The Gates Foundation Trust employs a buy-and-hold strategy with a high concentration in public equities. “Since Q2 2009, its top 10 investments have consistently represented over 80% of the portfolio, a figure that increased to over 90% by Q3 2014,” says Drayton D’Silva, chief executive officer at Tower Hills Capital, an investment firm in New York.
The likely reason for the Q1 trades is to allocate capital toward the initiatives, commitments and causes the trust supports. “Notably, the foundation has been reducing its position in BRK.B, selling exactly 5 million shares each quarter for three consecutive quarters, followed by purchasing 5 million to 8 million shares in the subsequent quarter,” D’Silva says. “This strategy, which mirrors dollar-value averaging, minimizes market timing risks.”
Here’s an updated view of the top stocks in the Gates Foundation Trust’s portfolio as of March 31:
| STOCK | % OF PORTFOLIO | MARKET VALUE OF SHARES |
| Microsoft Corp. (MSFT) | 33.5% | $15.4 billion |
| Waste Management Inc. (WM) | 16.4% | $7.5 billion |
| Berkshire Hathaway Inc. (BRK.B) | 15.9% | $7.3 billion |
| Canadian National Railway Co. (CNI) | 15.8% | $7.2 billion |
| Caterpillar Inc. (CAT) | 5.9% | $2.7 billion |
| Deere & Co. (DE) | 3.2% | $1.5 billion |
| Ecolab Inc. (ECL) | 2.6% | $1.2 billion |
Microsoft Corp. (MSFT)
Microsoft is far and away the cleanup hitter in Gates’ all-star lineup. It encompasses 33.5% of the portfolio and has a market capitalization
of $3.2 trillion as of May 21. MSFT’s one-year return is about 35% as of mid-May. That’s down from 60% in February, when the Gates Foundation Trust’s last 13F was filed, but still impressive. (The SEC requires Form 13F filing within 45 days of the end of a calendar quarter.)
The portfolio managers cut the trust’s MSFT allotment by 2.7% in the fourth quarter of 2023 and have continued to prune the position, selling 1.7 million shares in the first quarter of 2024.
MSFT has stayed active in artificial intelligence, which promises to continue to be a big revenue producer for the technology giant. In early May, Microsoft President Brad Smith stood next to President Joe Biden as he announced a new $3.3 billion data and training center in Mount Pleasant, Wisconsin, that will focus on cloud computing and AI infrastructure development.
The company also has a $13 billion investment in OpenAI, which is making news with a new ultrafast AI chatbot model called GPT-4o, which improves on GPT-4’s outputs across text, voice and vision.
Talk of a deal with Apple Inc. (AAPL) that would use ChatGPT in iOS 18 raised eyebrows on Wall Street, with Wedbush Analyst Dan Ives citing potential “myriad” revenues if the deal is clinched. Meanwhile, MSFT’s Azure cloud computing platform has helped fuel the company’s rising profits in the cloud sector, and sector revenues were up 23% in the most recent quarter to $35.1 billion.
Portfolio weight: 33.5% Market value of shares: $15.4 billion
Waste Management Inc. (WM)
The Gates trust has bumped Waste Management up to the second-biggest holding in the portfolio, now at 16.4% of assets in Q1 2024, as opposed to 14.9% in Q4 2023, when WM was the fourth-largest component. The timing is good, as WM shares are on the upswing in 2024, up roughly 16.7% on a year-to-date basis as of mid-May and more than 29% over the past year. That’s moved the portfolio’s WM share value from $6.3 billion in Q4 2023 to $7.5 billion so far in 2024.
WM’s promotion should be no surprise to those familiar with the trust’s investing pattern. Gates loves to back boring but reliably productive stocks, which fits WM perfectly. There’s nothing exotic about trash removal or recycling, but the company always turns a profit, churns out a solid dividend and has strong free cash flow.
Take WM’s first-quarter results, reported on April 24. The company posted $714 million in free cash flow and returned $557 million to its investors via share buybacks and dividend payouts (its forward dividend yield is over 1.4%).
The company also holds 30% of the total landfill waste volume in the U.S., 19% higher than its biggest competitor, Republic Services Inc. (RSG). Waste Management recently raised its outlook for adjusted operating earnings before interest, taxes, depreciation and amortization, EBITDA margin and free cash flow in 2024.
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, which turns waste into an energy source. That’s good for the environment but also for Waste Management: It allows the company to resell the gas it draws from its landfills, giving the company another rising profit center.
Portfolio weight: 16.4% Market value of shares: $7.5 billion
Berkshire Hathaway Inc. (BRK.B)
The Gates Foundation Trust also continued its recent pattern of curbing Berkshire shares, cutting its BRK.B shares by 13.1% in the first quarter, which amounted to about a percentage-point cut in the portfolio’s position.
Warren Buffett’s Berkshire has returned about 16.2% on a year-to-date basis in 2024, ahead of the S&P 500’s 11.6% return over the same timeframe. Even so, Berkshire’s shares have barely budged since mid-February, and Buffett aggressively cut his portfolio’s stake in Apple in Q1 and shed 88% of his Paramount Global (PARA) shares. Apple was a particular surprise, as its position in the Berkshire portfolio was reduced from 50% to 40%, but the 12.8% share cut may be little more than a tax move by Buffett. He has long tracked capital gains tax hits and may be selling while those rates remain relatively low amid talk of tax hikes in 2024.
If Buffett remains in a “sell” state of mind, Gates likely won’t pare down his Berkshire holdings much further in the first half of 2024. Defensive positions are part of the Gates trust’s portfolio, and Berkshire fits in that regard. If the economy tips into a slide, chances are the Gates trust will hang on to BRK.B because it is the kind of defensive stock where Gates can find shelter during stormy market periods.
Portfolio weight: 15.9% Market value of shares: $7.3 billion
Canadian National Railway Co. (CNI)
Canadian National Railway shares have derailed a bit in 2024, returning a meager 1.3% year to date. That will likely not send anyone at the Gates trust into a panic, though, as the organization has a long history with the transportation titan.
The Gates trust has owned Canadian National since 2013, building a sizable position in the stock over the past decade. The trust boosted its stake in the Montreal-based company from 8.6 million shares in 2013 to 54.8 million as of May 15. At 15.8% of the total portfolio, CNI is the fourth-largest stock position, and it also brings a nearly 2% dividend yield to the table.
So what’s ailing CNI in the spring of 2024? Labor woes were one thing, although the company’s CNTL subsidiary just inked a new pact with its union-linked trucking services owner-operators in a deal announced in early May. The deal runs through 2027 and should keep CNI’s labor issues at bay and transport shipments moving uninterrupted.
First-quarter numbers also came in below expectations, with Canadian National reporting profits of 1.72 Canadian dollar ($1.28) per share, down 5.5% from a year earlier. Revenues were also off by 1.5%. Still, analysts cite CNI as one of the most reliable stocks in its sector, with a robust track record of single-digit top-line growth and a solid dividend payout.
Portfolio weight: 15.8% Market value of shares: $7.2 billion
Caterpillar Inc. (CAT)
This farm and agricultural construction machinery titan makes up 5.9% of the Gates portfolio in 2024, up from 5.1% in late 2023. CAT shares have fueled the quarterly rise, up about 22.4% so far this year as of mid-May.
Caterpillar represents another stability play for the Gates portfolio in 2024. The company crushed its first-quarter 2024 expectations, reporting a 5.6% rise in earnings per share against an analyst consensus of 5.1%. While overall revenues are down, some of that shortfall can be attributed to share buybacks coming out of a rising free cash flow estimate of $5 billion to $10 billion against an earlier estimate of $4 billion to $8 billion.
Thanks to taxpayer largesse, Caterpillar should be a revenue producer for years to come. 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.
Wall Street analysts agree, with J.P. Morgan recently boosting its share price target from $385 per share to $435 per share over the next year. (CAT closed at $359.07 per share on May 21.)
Like his friend and mentor, Buffett, Gates likes industry leaders who can keep growing and delivering dividends. With a 1.5% dividend yield and big infrastructure profits on the horizon, Caterpillar is set to bulldoze the competition for the remainder of 2024.
Portfolio weight: 5.9% Market value of shares: $2.7 billion
Deere & Co. (DE)
The farm and heavy-construction machinery company accounts for 3.2% of the Gates portfolio, with a market value that remains at $1.5 billion in Q1. The trust’s DE position was little changed in early 2024, with no trades on the docket.
Deere has turned its stock-price malaise around in 2024, with its share price up 9% since mid-February, after a long slide in 2023 and the first months of 2024. The company’s move to tweak its pricing structure and generally solid customer demand for its products has caught the attention of investors in 2024, especially those looking for some stability in increasingly chaotic markets.
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 shift into artificial intelligence with productivity-boosting products should catch customers’ attention, too. Its See & Spray weed-killing product, for example, uses AI-powered cameras to target specific land areas that need herbicide spraying, saving farmers time and money in the process.
With a 1.5% dividend yield going forward, it’s easy to see why DE is a perennial favorite for the Gates trust, even with the 9.2% it cut from its holdings in late 2023.
Portfolio weight: 3.2% Market value of shares: $1.5 billion
Ecolab Inc. (ECL)
The Gates trust made no trades on Ecolab in the first three months of 2024, even as ECL stock continues to outperform, up 18.8% year to date through May 21. Just as important to the Gates trust, Ecolab also fits Gates’ worldview with its emphasis on green energy.
Ecolab specializes in sustainable water, hygiene, and energy technology and services, which are all areas of keen interest to public policymakers and clean energy-minded investors. Analysts are taking note of Ecolab’s growth of late, with Barclays analyst Manav Patnaik maintaining his “buy” rating on ECL in May, with a target price of $260 per share (the stock closed at $235 per share on May 21). Ecolab also recently earned a “buy” rating from RBC Capital’s Ashish Sabadra on May 1.
The company’s decision to expand its investment in digital technologies and AI should raise productivity and catch the eye of tech-savvy investors.
Customer diversity is another selling point. 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.
The trust holds 5.2 million shares of Ecolab as of Q1, with a portfolio weighting of 2.6% (slightly up from 2.5% in Q4 2023) and a market value of $1.2 billion. That’s up from $1 billion the previous quarter.
Portfolio weight: 2.6% Market value of shares: $1.2 billion
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Bill Gates Portfolio: 7 Best Stocks to Buy Now originally appeared on usnews.com
Update 05/22/24: This story was previously published at an earlier date and has been updated with new information.
