While the billionaire philanthropist owns dozens of stocks, just four make up the majority of his portfolio.
Most investors are familiar with Bill Gates, the billionaire philanthropist who cofounded Microsoft (MSFT +0.56%). After heading up the technology conglomerate for 25 years, the chief executive stepped down to spend more time focusing on his charitable work. Gates is worth an estimated $106 billion, according to Forbes, making him the 18th richest person in the world.
The vehicle established to support his charitable endeavors is the Gates Foundation Trust. The mission of the trust is “to create a world where every person has the opportunity to live a healthy, productive life.” The foundation has donated more than $100 billion over the past 25 years, “taking on the toughest, most important problems.”
While the Foundation owns stakes in dozens of companies, in the second quarter (the most recent data available), several well-known stocks top the list.
Image source: Getty Images.
1. Microsoft: 27%
Given Gates’ long history with the company, it shouldn’t be a surprise that Microsoft tops the list — particularly since he seeds the Trust through ongoing donations of Microsoft shares. The Gates Foundation owns more than 26 million shares of Microsoft stock, valued at $13 billion.
After it stagnated for more than a decade, CEO Satya Nadella breathed new life into the industry stalwart, making it a cloud staple and an artificial intelligence (AI) powerhouse in the process.
In the calendar second quarter, Microsoft Azure was the world’s second-largest cloud infrastructure provider, controlling 20% of the market, according to data aggregator Statista. It was also the fastest-growing of the “Big Three” cloud providers, growing 34% year over year. Total cloud revenue of $29.9 billion now accounts for 39% of Microsoft’s total revenue and is its fastest-growing business segment. Demand for AI is helping fuel the company’s cloud growth.
Finally, Microsoft’s dividend track record stretches back to 2004, notching 16 consecutive annual increases. While the dividend yield is a seemingly paltry 0.7%, the stock has returned 140% over the past five years. Furthermore, its payout ratio of 23% is at its lowest level in 10 years. That gives Microsoft plenty of resources to boost its dividend for the foreseeable future.
Today’s Change
(0.56%) $2.88
Current Price
$520.54
Key Data Points
Market Cap
$3869B
Day’s Range
$517.71 – $525.23
52wk Range
$344.79 – $555.45
Volume
20K
Avg Vol
20M
Gross Margin
68.82%
Dividend Yield
0.01%
2. Berkshire Hathaway: 25%
Warren Buffett and Gates cofounded the Giving Pledge in 2010, and Buffett plans to (eventually) donate all his Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) stock to charity. Thus far, the Oracle of Omaha has given away more than $60 billion, encouraging other billionaires to take the pledge. It isn’t surprising, then, that the Gates Foundation holds more than 24 million shares of Berkshire Hathaway stock, valued at $11.7 billion.
While the shares were donated, the Foundation has good reason to hold them. Berkshire’s broad cross-section of businesses provides solid diversification and steady cash flow until the stock is liquidated to support charitable causes. Furthermore, despite its stodgy reputation, Berkshire stock has gained 135% over the past five years, outpacing the 96% returns of the S&P 500 (SNPINDEX: ^GSPC).
Given Buffett’s plans to step down this year, he’s leaving the company in good hands, so it’s not surprising that Berkshire stock represents such a large part of the Trust’s holdings.
Today’s Change
(0.11%) $0.52
Current Price
$491.81
Key Data Points
Market Cap
$1061B
Day’s Range
$488.19 – $492.98
52wk Range
$437.90 – $542.07
Volume
1.7K
Avg Vol
4.3M
Gross Margin
24.15%
Dividend Yield
N/A
3. Waste Management: 15%
One person’s trash is another person’s treasure, according to the old adage, which helps make the case for Waste Management (WM +0.73%). That also helps to explain why the Gates Foundation holds a stake of more than 32 million shares of Waste Management stock, valued at nearly $7.4 billion.
Trash collection and recycling might also qualify as “stodgy” businesses, but these essential services generate consistent cash flow — something Gates and Buffett both like. Furthermore, the company is expanding its services by diverting organic waste from its landfills and converting it into green energy to generate electricity or fuel vehicles.
Then there’s the dividend, which Waste Management has boosted for 21 years running, currently yielding 1.5%. With a payout ratio of 46%, there’s likely plenty more where that came from.
4. Canadian National Railway: 12%
Another industry that bears the Buffett seal of approval is railroads. Berkshire Hathaway famously bought up Burlington Northern Santa Fe lock, stock, and barrel in 2009. At the time, Buffett said railroads were a very “cost-effective way” to move goods, releasing “far fewer pollutants into the atmosphere.” As a student of Buffett, it’s no wonder the Gates Foundation holds nearly 55 million shares of Canadian National Railway (CNI +1.22%), worth $5.7 billion.
The company is the largest rail network in Canada and the only North American railway connecting the Atlantic, Pacific, and Gulf Coasts, giving it a dominant position on the continent. Furthermore, railroads are generally much more efficient than even long-haul trucking. Add to that steep barriers to entry and a wide economic moat, and it’s easy to see the allure.
Finally, Canadian National has consistently increased its dividend for 20 consecutive years and currently yields nearly 2.7%. Its relatively low payout ratio of 48% suggests its track record of payout increases will likely continue.
