Bill & Melinda Gates Foundation 13F Stock Holdings & Strategy

Published on October 15th, 2020 by Nikos Sismanis

Founded by Bill & Melinda Gates, the namesake foundation is currently the largest private foundation in the world. The Foundation is a tax-exempt entity aiming to provide charitable donations worldwide, while its underlying Trust still aims to deliver positive returns to be able to fund said donations sustainably in the future. The Trust holds more than $43 billion in net assets, and its Trustee is Bill Gates’ long-term friend Warren Buffet, who has pledged the majority of his fortune to the Foundation.

While the Foundation’s goal is not necessarily to maximize returns, it still aims for its investments to appreciate in order to maintain its long-term charitable goals. As a result, its holdings may include some ideal picks for investors looking for some low-volatility, blue-chip stocks to allocate their capital, that Bill & Melinda Gates’ Foundation has trusted in appreciating in the long run.

As of its last f13 filing, the Foundation’s Trust had around $20 billion in managed 13F securities.

Investors following the company’s 13F filings over the last 3 years (from mid-August 2017 through mid-August 2020) would have generated annualized total returns of 9.3%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 11.9% over the same time period.

Note:  13F filing performance is different than fund performance.  See how we calculate 13F filing performance here.

You can download an Excel spreadsheet with metrics that matter of Bill & Melinda Gates Foundation’s current 13F equity holdings below:

 

Keep reading this article to learn more about Bill & Melinda Gates Foundation’s investments.

Table Of Contents

The Foundation’s largest investment, Berkshire Hathaway

In 2006, Buffett pledged most of his fortune to the Gates Foundation by donating 10 million shares of Berkshire Hathaway stock, which was then worth approximately $31 billion. Since then, continuous contributions have lifted the total amount of shares held by the Foundation to nearly 40 million. At Berkshire’s current share price of around $216, the Foundation’s stake is valued at around $8.6 billion, or around 42% of its total holdings.

As we mentioned, the Trust has to be generating enough returns that are more or equal to the Foundation’s donations, so that it doesn’t drain its funds over time. In the past, investing in bonds would be an ideal option. However, in the current ultra-low environment, it has to resort to equities. The challenge that arises is that while equities may deliver superior returns, they can also be more volatile.

Berkshire Hathaway perfectly fits the Foundation’s goal of generating constant and low volatility returns, as the Oracle of Omaha has demonstrated by successfully managing the company for decades. Combined with Warren Buffet’s similar philanthropic aspiration, we can see what Bill & Melinda’s Foundation has such a high exposure in Berkshire.

The company is able to use its float from its privately owned businesses, such as Geico Insurance and BNSF Railway, to allocate towards its public-equity investments, which normally are blue-chip, and much- reliable companies. Examples include Coca-Cola, Bank of America, American Express, and other long-term proven compounders.

Berkshire’s largest holding, by far, is Apple. Warren Buffet’s regular additions to the position combined with Apple’s aggressive stock buybacks have resulted in Berkshire owning around 6% of the company’s shares.  The position makes up nearly half of Berkshire’s portfolio. While this may cause some diversification concerns, investors should have little worries, as the company is a consistent free cash flow generation machine with around $93 Billion in cash. Further, Berkshire itself holds around $146 billion in cash, making for nearly 30% of its total market cap.

Source: Berkshire’s filings, Author

Combining Berkshire’s cash-rich balance sheet, blue-chip stock portfolio, and solid private investments, Bill & Melinda’s Foundation can rely on Warren Buffet’s expertise to generate consistent and low volatility returns over the long haul.

For an investor looking for stable performance and a great margin of safety, Berkshire Hathaway is, without a doubt, a great pick, especially considering that the largest private Foundation in the world has placed most of its funds in.

Source:  Time Magazine

Bill & Melinda Foundation’s 10 most significant stock investments

Following Berkshire’s philosophy and investing principles into the rest of his Foundation’s portfolio, Bill Gates has similarly been a fan of trustworthy companies that have historically proven to be a quality investment over time.  As a result, the rest of the Trust’s 10 most significant holdings are also blue-chip stocks. The Foundation barely changes its holdings over the years, which further displays Warren Buffet’s “hold-forever” influence in its management.

Source: Berkshire Hathaway filings

Waste Management (WM)

Waste management is one of Bill Gate’s favorite stocks since he has also been buying shares for his personal portfolio, outside of his Foundation. The company occupies around 10% of the Trust’s portfolio, positively checking the criteria boxes of being a long-term compounder of stable returns.

The stock is paying the Foundation with consistent dividends, which have neem growing annually for the past 10 years with a CAGR of 5.6% of this period. Waste Management’s essential and consistently-needed services generate very reliable cash flows, which are often locked through multi-year contracts with governmental entities.

Simultaneously, because of the company’s reliable cash flows, shares are generally trading at a pricy valuation of around 30 times the underlying earnings, despite its relatively limited growth. Still, Waste Management should continue delivering stable returns over the long-term as it turns trash into cash!

Canadian National Railway (CNI)

Following a similar philosophy, Bill Gates’ investment portfolio includes a position in Canadian National Railway, which occupies nearly 9.00% of its holdings. The company also features a dividend growth record of 15 conductive annual increases, which its stable business model has helped achieve. With most of the world’s basic consumables, materials, and commodities requiting transportation by train, CNR’s services will always be needed in the modern world, despite its old fashioned business model. As a result, the company has been delivering solid profitably during the months of COVID-19, despite the pandemic’s challenges. We believe that the company remains an excellent long-term holding, with a safe payout ratio and promising growth prospects through its rail expansion plans.

Caterpillar (CAT)

Proudly included in the Dow Jones Industrial Average for its long-term value creation in the industrial sector, Caterpillar is a good ol’ American stock, featuring an uninterrupted dividend record since 1993. While its revenues were slightly reduced over the past couple of quarters due to COVID-19, the company has remained profitable, as its cash flows are well diversified with a global presence. Demand for construction machinery remains strong, and the dividend is covered by almost two times the company’s earnings, despite its reduced turnover as of recently.

At a P/E ratio of around 20, the stock may provide investors with a decent entry point, especially those who are looking to hold over the long-term, similarly to Bill Gates.

Walmart (WMT)

Showcasing a dividend growth of 47 consecutive annual dividend increases, Dividend Aristocrat Walmart is battling to get into e-commerce and leverage its world-class distribution network to actively compete with Amazon.

The stock is currently trading at all-time highs, as the company is making notable progress in its online segments, while its essential retail locations have been proving solid results, despite the pandemic. During Q2-2020, the company reported e-commerce sales were 97% higher YoY, which is greatly promising new for investors who were starting to worry the retail giant was falling behind of the current global online trends.

While the stock’s valuation may be looking attractive at around 23 times its earnings, it is actually quite high compared to its historical one in the low teens. Due to its prolonged valuation expansion, shares currently have a 15-year low yield of around 1.5%. As a result, it’s quite likely the current investors enjoy a bit more humble returns than the company’s historical ones.

Crown Castle (CCI)

One of the most rewarding stocks in Bill Gate’s charitable portfolio is its stake in Crown Castle, which has spoiled investors over the past decade by generating CAGR returns of around 17% over this period. The company’s cell towers are positioned to benefit from the upcoming 5G revolution, while its current towers provide the company with incredibly secured cash flows. They are leased to all of the telecommunication giants through multi-year contracts, and still, the Trust’s largest investment is expected to remain the same, as Warren Buffet’s heavy involvement with the fund synergizes with his goal to distribute the majority of his wealth to charity.

While many of the stock’s mentioned may lack the potential to deliver explosive returns, their huge moat and essential operations to society guarantee them steady profitability, making them an ideal pick for those looking to allocate capital into low-volatility, but also gradually growing companies.rental payments face no correlation to the underlying economy, as telecom providers need to offer consistent cellular coverage.

Crown Castle’s rental revenues even grew over the past couple of quarters, despite COVID-19, showcasing their stability under any economic environment. While the REIT’s relatively low-for-the-sector yield of 2.8% may not fit the needs of income-oriented investors, those who are looking for a mix of dividend growth and capital application will find Crown Castle an ideal holding for the long term.

Ecolab (ECL)

With another Dividend Aristocrat on board, Bill Gate’s charitable portfolio holds another long-term compounder with 27 years of consecutive dividend increases. The company’s revenues were slightly affected during the pandemic, causing it to report its first quarterly loss in more than 25 years. However, Ecolab’s services remain incredibly essential as it is a market leader in water treatment, cleaning, and sanitizing solutions whose demand remains strong, especially during a pandemic.

The market is well aware of that, which is why shares are trading near all-time highs despite the recent challenges. For those who don’t mind Ecolab’s tiny dividend yield, the stock remains highly investable for those looking to buy and … “forget about it.”

United Parcel & FedEx (UPS) & (FDX)

Collectively occupying around 7% of the Foundation’s portfolio, United Parcel & FedEx are two more industrial heavyweights whose operations are essential for non-stop demand for home deliveries all over the globe.

Both stocks are trading at all-time highs, currently, as COVID-19 has accelerated the demand for everyday essentials to consumers’ doorsteps due to the staying-at-home economy. Amazon has been making progress in developing its own delivery fleet over the years, which initially panicked investors. However, the market has become well-aware that both UPS and FedEx’s humongous distribution networks around the world are incredibly hard to replicate quickly. Further, both companies have decades of expertise in the sector, which has forged a superb moat through their duopolistic operations.

Despite their prolonged rally over the past few quarters, the two companies provide a healthy combination of dividend growth and low volatility operations, which can fit greatly to portfolios looking for such characteristics, similar to the Foundation’s ones.

Schrödinger (SDGR)

Closing Bill & Melinda Foundation’s list of 10 most significant holdings, Bill Gates himself has allocated around half a billion dollars to Schrödinger. The company provides a computational platform that aims to speed a drug’s discovery for the biopharmaceutical industry. Its revenues remain relatively low, with a run-rate of around $100 million, and the bottom line remains negative, which makes the stock sharing little to no similarities with its peers mentioned earlier.

This is a rare case in which Bill Gates has personally identified the stock’s potential to make significant advancements in drug discovery, which goes hand in hand with the Foundation’s vision to provide such treatments for humans. By holding around 14% of the company’s shares, Bill Gates is both investing in a company whose progress could greatly benefit humanity while also potentially profiting from it, which would, in turn, be used for further donations. Hence, the stock greatly fits the Foundation’s portfolio, despite a relatively short life as a public company.

Final Thoughts

Overall, Bill Gates’ Foundation holds reliable stocks that are able to achieve consistent turnover during the toughest economic environments, in order to provide the Foundation with adequate returns to donate to charitable causes.

As you can see, all of its holdings have a relatively low beta, which helps with avoiding intense price swings, and hence deliver more predictable returns.

Source: Author

The Trust’s largest investment is expected to remain Berkshire, as Warren Buffet’s heavy involvement with the Foundation synergizes with his goal to distribute the majority of his wealth to charity. While many of the stocks mentioned may lack the potential to deliver explosive returns, their huge moat and essential operations to society guarantee them steady profitability, making them an ideal pick for those looking to allocate capital into low-volatility, but also gradually growing companies.