Unlocking the Secrets of Bill Gates’ Philanthropic Empire
A Commitment to Giving Back
For decades, Bill Gates has topped the list of the world’s wealthiest individuals. In 1999, he became the first centibillionaire, a milestone he reached 18 years before anyone else. Around that time, Gates and his then-wife Melinda established the Bill & Melinda Gates Foundation, a non-profit dedicated to improving healthcare and reducing poverty worldwide. Over the past 25 years, Gates has donated a significant portion of his wealth to the foundation, with plans to give away nearly all his assets during his lifetime.
A Shared Vision with Warren Buffett
Gates isn’t alone in his philanthropic efforts. His friend and fellow billionaire Warren Buffett is also a major contributor to non-profits, including the Gates Foundation. Buffett served as a trustee for the foundation until 2021, likely influencing the trust’s investment strategy. Today, the foundation’s equity portfolio is valued at around $49 billion, with a staggering 69% invested in just three phenomenal stocks.
The Top Holdings Revealed
So, what are these three stocks that make up the bulk of the Gates Foundation’s portfolio? Let’s dive in and explore the investment wisdom behind these picks.
Microsoft: A Tech Giant with AI Ambitions
As one of the biggest donors to the foundation, it’s no surprise that Microsoft shares are a significant holding. Gates’ last major donation in 2022 was worth around $20 billion, with a large chunk coming in the form of Microsoft shares. The trust added approximately 38 million shares to its portfolio in 2022, valued at around $8.9 billion at the time. Today, those shares are worth a staggering $15 billion.
Microsoft’s success can be attributed to its early investment in OpenAI, a pioneer in generative artificial intelligence. This strategic move made Microsoft’s cloud platform, Azure, the top choice for developers using new large language models to create applications. As a result, Azure revenue has accelerated over the past two years, and the company’s enterprise software business continues to generate significant cash flow.
Berkshire Hathaway: A Value Investing Icon
Warren Buffett’s annual donations to the Gates Foundation since 2006 have been instrumental in building the trust’s portfolio. Berkshire Hathaway Class B shares make up a significant portion of the foundation’s holdings, with around 24.6 million shares valued at over $4 billion. Buffett’s donation comes with a stipulation that the foundation must spend the equivalent of his annual donation each year, plus 5% of the foundation’s remaining assets.
Berkshire Hathaway has demonstrated strong operating results, with income from core operations climbing to $22.8 billion in the first half of 2024. While Buffett has taken steps to reduce Berkshire’s exposure to the stock market, the company’s deleveraged balance sheet and cash reserves position it for future growth opportunities.
Waste Management: A Boring Business with a Strong Moat
Waste Management, the largest waste hauler in the United States, may seem like an unlikely holding for a tech billionaire like Bill Gates. However, its simple, boring business model and strong moat protecting its market position make it an attractive investment for value investors like Warren Buffett.
The Gates Foundation owns around 35 million shares of Waste Management, worth over $7 billion today. With an enterprise value-to-EBITDA ratio of close to 17, shares are priced slightly above their historic average. However, this multiple is in line with some of Waste Management’s biggest competitors, making it an attractive investment opportunity.
These three phenomenal stocks have been instrumental in driving the Gates Foundation’s portfolio growth. By understanding the investment wisdom behind these picks, we can gain valuable insights into the strategies of two of the world’s most successful billionaires.
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