The billionaire philanthropist owns 20 stocks, but only four make up the bulk of his portfolio.
Most people have probably heard of Bill Gates. microsoft (MSFT 0.11%) and, more recently, his work as a billionaire philanthropist.
The former CEO left Microsoft to focus on philanthropy after more than a quarter-century at the helm of the technology company he founded. According to , Gates is currently worth $105.8 billion (as of this writing). forbescurrently the 14th richest person in the world. However, he vowed to donate most of his money to charity so that “the majority of my wealth is used to help as many people as possible.”
To further that goal, he established the Bill & Melinda Gates Foundation Trust. According to the Gates Foundation's website, “Our mission is to create a world in which all people have the opportunity to live healthy and productive lives.” Since its founding, the foundation has disbursed $77.6 billion by the end of 2023 and is “tacking on the toughest and most important problems.”
The trust continues to own stocks in 20 companies, but as of the end of the second quarter, 81% of its holdings consist of just four stocks.
Image source: Getty Images.
1. Microsoft: 30%
It should come as no surprise to anyone that the trust's largest holding – by a wide margin – is Microsoft, the company Gates founded. The foundation owns about 35 million Microsoft shares, valued at about $14.3 billion.
But this isn't your grandfather's Microsoft. The company has now moved beyond traditional software, browsers, and operating systems to become a major player in many emerging industries. The company is the world's second-largest cloud infrastructure provider, giving Microsoft a pole position in marketing artificial intelligence (AI) products and services to cloud customers.
Management noted that Azure Cloud's growth includes “eight points driven by AI services,” indicating that this strategy is driving further business. Analysts say these AI-related services, including the AI-powered digital assistant Copilot, could generate $143 billion in additional revenue by 2027. evercore ISS.
There's also Microsoft's quarterly dividend, which the company has paid consistently since 2004 and increased annually since 2011. The current yield of 0.8% may seem like peanuts, but it's compounded by the 202% share price increase over the past five years (as of this writing). Additionally, the dividend payout ratio of less than 25% suggests there may be further upside potential from here.
Given the company's track record of success, it's easy to see why Gates likes Microsoft. I believe this will continue to be one of his most profitable investments. That's why I own the stock.
2. Berkshire Hathaway: 23%
Fellow billionaire philanthropist Warren Buffett, CEO Berkshire Hathaway (BRK.A 1.32%) (BRK.B 1.16%)has joined Gates in pledging to donate the majority of his wealth to charity. Buffett signed the Giving Pledge in 2006 and has donated more than $43 billion to the trust, including $5.3 billion in Berkshire Hathaway stock earlier this year. are. As a result, the Gates Foundation now owns about 25 million shares worth more than $11 billion.
Berkshire Hathaway stock represents instant diversification thanks to the company's dozens of business interests and stock holdings, and it's surprising that it accounts for such a high percentage of the trust's holdings. That's not the point. Additionally, Berkshire rakes in billions of dollars in dividend income each year and holds a massive $277 billion in cash.
Given the diversification of assets, consistent dividend income, and Buffett's unparalleled track record, I think keeping a significant amount of Berkshire Hathaway stock in a trust vault is a wise move.
3. Waste management: 15%
Gates likes companies with strong pricing power and solid recurring revenues, and you'd be hard-pressed to find a better example. waste management (W.M. 0.27%). Simply put, society will continue to produce waste for the foreseeable future. The Gates Trust owns more than 35 million shares, worth $7.2 billion.
Waste management has expanded beyond its roots in trash collection to include collecting glass, paper, metals, and plastics and forwarding them to reclamation stations for recycling. The company also collects landfill gas from its sites for power generation, another growing source of income.
Second quarter sales increased 5.5% year-over-year and adjusted operating EBITDA (earnings before interest, taxes, depreciation, and amortization) increased due to higher payments for recyclables and higher overall prices. Increased by 10%.
Dividends must also be considered. Waste Management has been a consistent payer since 1998 and has increased its dividend for 21 consecutive years. The current dividend yield is 1.46%, but the payout ratio is only 46%, so there is plenty of room for future dividend increases.
I don't own Waste Management stock, but I think it's a smart move for income investors.
4. Canadian National Railway: 13%
Gates and Buffett also have an affinity for railroads. When Berkshire acquired Burlington Northern Santa Fe in 2009, Buffett said the railroad was “moving goods in a very cost-effective way… in a very environmentally friendly way.” I…” he said. [releasing] There are far fewer pollutants being emitted into the atmosphere.'' Gates clearly agrees, and the trust owns about 55 million shares. canadian national railway (CNI 0.64%)worth approximately $6.2 billion.
The Canadian National Railway is unique in that it is North America's only transcontinental railroad, connecting the Atlantic coast, the Pacific coast, and the Gulf of Mexico. Buffett notes that rail is four times more efficient than trucks, making it a more cost-effective option while also producing 75% fewer greenhouse gas emissions than long-haul trucks. There is also a strong economic moat and significant barriers to entry, which make rail even more attractive.
Canadian National has a consistent dividend history, increasing its dividend every year since its IPO in 1995. The current dividend yield is 2.2% and the payout ratio is 38%, suggesting there is plenty of room for further upside.
You don't need to be convinced of the value that comes with investing in Canadian National Railways. I'm already a shareholder.
