Diversify is the name of the game. Spread your eggs across a lot of baskets. That’s what the professionals say, but why then do the rich do the exact opposite so often?
Take Bill Gates, for example, he’s got 65% of his portfolio allocated to just 3 stocks. Billions upon billions of dollars are invested in less than a handful of stocks and one of them in particular is likely to really surprise you.
So, what are his biggest holdings?
Key Points
- The largest holding, valued at $15.4 billion, represents a third of Gates’ portfolio.
- Waste Management is the best-performing stock in Gates’ portfolio, and features a stable, recession-resistant business model.
- With a $7.3 billion stake in Berkshire Hathaway, Gates has exposure to the investing expertise of his long-time friend, Warren Buffett.
Microsoft
It’s no surprise that Microsoft leads the way as the top holding in the Bill and Melinda Gates Foundation’s portfolio with a $15.4 billion stake representing about a third of the entire portfolio.
What might come as a surprise is that the decade or so tenure of Gates’ sidekick and early partner Steve Ballmer as CEO led to virtually no market capitalization gains. It wasn’t until Satya Nadella took over that Microsoft essentially 10x’ed from $300 billion to around $3 trillion in valuation.
It’s also probably a surprise to many that Microsoft’s operating margins are superior to even Apple’s and so it’s profitability rivals the Cupertino rival, even though revenues aren’t as large.
Couple those positives with Microsoft’s clear pulse on what’s new, such as its investment in Open AI and you can see the future is as bright as ever.
Waste Management
Waste Management is arguably the biggest surprise in Gates’ portfolio. On the one hand, it’s an obvious play. Waste removal is an essential need that won’t go away for the foreseeable future.
Yet it is tethered to all sorts of other factors such as population growth or decline, which seem to be issues close to Gates’ heart.
Still, Waste Management has been the best-performing of the three largest stocks in the portfolio. The foundation owns about 35 million shares and every year they spit out about $100 million in dividends alone.
Berkshire Hathaway
Last but not least on the list is Berkshire Hathaway. With his close ties to Buffett over the years it’s no surprise that Gates and his investment team purchase Berkshire shares.
Valued at $7.3 billion in the Gates Foundation’s portfolio, Berkshire has a history of outperforming the S&P 500 and delivering strong returns to long-term shareholders. The company’s massive cash pile, forecast to eclipse $200 billion this year provides Buffett with massive optionality.
While Berkshire does not pay dividends, it returns value to shareholders through share buybacks, repurchasing $9.2 billion of its own shares in 2023. It’s no wonder as a result that Gates has held tight to the vast majority of his holdings in Berkshire.