Wealthy tycoon Bill Gates Holds Over Three-Quarters of His $45 Billion Fortune in Only Four Different Shares
Bill Gates, a prominent figure in technology, is frequently recognized due to his association with Microsoft. As the co-founder and former long-term CEO of this corporation (identified as MSFT, with a current decline of 1.38%), Gates held a significant role for over 25 years. Now, his focus primarily centers around philanthropic work.
According to Forbes, Gates' net worth currently stands at $104.8 billion, making him the world's 13th wealthiest individual. It's crucial to acknowledge that Gates has pledged to utilize the majority of his fortune to aid as many individuals as feasible in their quest for a better life.
To materialize this objective, he established the Bill & Melinda Gates Foundation Trust. The organization's mission as stated on their website, is to foster an environment in which everyone has the opportunity to live a prosperous, healthy life. By the end of 2023, the foundation had dispensed $77.6 billion in financial aid since its formation, with a major emphasis on tackling the world's most pressing challenges.
Despite the Trust possessing stakes in 24 different stocks, by the conclusion of the third quarter, 80% of its holdings were represented by only four stocks.
1. Microsoft: 27%
Given his extensive connections to the company, it's not unexpected that Microsoft is Gates' most prominent investment. The Trust holds approximately 39 million shares of Microsoft stock worth around $12.4 billion.
There are numerous factors contributing to Microsoft's prominence in the portfolio. Apart from the company's success in internet browsers, software, and operating systems, Microsoft is the world's second-largest provider of cloud infrastructure, accounting for 20% of the market. The organization is also a key player in the realm of artificial intelligence (AI). The synergy between these sectors positions Microsoft favorably in these burgeoning growth industries.
Management announced that the growth of Azure Cloud included an additional "12 points from AI services," making it a significant contributor to its growth. In fact, according to analysts at Evercore ISI, Microsoft's AI offerings have the potential to generate additional revenue of $143 billion by 2027.
Microsoft has also been paying a dividend since 2004, an increase every year since 2011. Although the yield of 0.8% may appear small, it enhances a stock price that has surged 190% over the past five years. Given its payout ratio of only 25%, further dividend increases are likely.
Given these factors, it's hardly surprising that Microsoft occupies such a prominent position in the Trust's holdings.
2. Berkshire Hathaway: 23%
Billionaire Warren Buffett, CEO of Berkshire Hathaway (BRK.A -0.08% and BRK.B -0.06%), along with Gates, was one of the founding members of the 'Giving Pledge.' Buffett has promised to donate 99% of his fortune to philanthropy during his lifetime or upon his death. As a result, the Gates Foundation owns over 22 million shares of Berkshire Hathaway stock, worth over $10 billion.
Given Berkshire's diverse holdings, which encompass numerous businesses and stocks, it is widely regarded as a secure investment. This, combined with Buffett's substantial donations, explains its impressive standing in the portfolio. Berkshire also generates billions of dollars in dividend income annually and currently has $325 billion in cash reserves.
Buffett is renowned as one of the world's most successful investors, and this in turn, contributes to Gates' ongoing investment in Berkshire Hathaway stock.
3. Waste Management: 16%
Waste Management may not be an exciting venture, but it succeeds in generating reliable, recurring revenue and possesses strong pricing power. This has earned it a favored position in Gates' investment portfolio, with the Trust holding more than 32 million shares worth $7.1 billion.
Beyond its waste collection foundation, Waste Management has been significantly investing in automation projects to enhance the profitability of its recycling operations. The company's initiatives in renewable natural gas projects have also proved fruitful.
Let's not forget Waste Management's dividend, which has been paid out annually since 1998. Moreover, the dividend has been increased for 21 consecutive years, providing a yield of 1.3%. With its payout ratio of only 45%, the likelihood of future dividend increases remains strong.
4. Canadian National Railway: 13%
The railway industry holds numerous appealing aspects, offering a combination of cost effectiveness and environmental advantages. This, coupled with high barriers to entry and robust economic moats, induces a keen interest in the sector. As a consequence, the Gates Trust holds approximately 55 million shares of Canadian National Railway (CNI 0.55%) worth around $6 billion.
Canadian National Railway is distinctive as the only transcontinental railroad in North America, providing connectivity between the Pacific Coast, the Atlantic Coast, and the Gulf of Mexico. As a mode of transportation, rail is four times more efficient than road freight and produces greenhouse gas emissions 75% less than trucks. There is also a robust economic moat and substantial entry barriers, which further enhance the allure of the railway industry.
Canadian National has maintained a steadfast record of dividend payments, with an annual increase since its initial public offering in 1995. Presently, it offers a yield of 2.2%, and its payout ratio of only 39% hints at promising future increases.
Beyond the previously mentioned justifications for Gates keeping these stocks in his Trust, there's another potent reason - this one might be even more persuasive. During the past five years, three out of the four have delivered triple-digit returns and surpassed the growth of the S&P 500, except for Canadian National Railway which lagged behind. This can be partly attributed to recent global economic circumstances and the inflationary environment, which negatively impacted the outcomes.
Considering these returns collectively, Gates' most significant investments present the most compelling case yet for why these stocks are a sound decision.
Gates' substantial investment in Microsoft, holding approximately 39 million shares worth $12.4 billion, is a result of his long-term association with the company and its promising growth potential in internet browsers, software, operating systems, cloud infrastructure, and artificial intelligence.
Gates' Trust also holds over 22 million shares of Berkshire Hathaway stock, worth over $10 billion, due to its diverse holdings, substantial dividend income, and the philanthropic efforts of its CEO Warren Buffett, who is a fellow Giving Pledge member.
