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Most people have probably heard of Bill Gates, best known as the co-founder of Microsoft (NASDAQ: MSFT) and, more recently, his activities as a billionaire philanthropist.
After more than a quarter of a century leading the tech company he founded, the former CEO left Microsoft to focus on his charitable efforts. Gates is currently (at the time of writing) worth $105.8 billion Forbesmaking him the 14th richest person in the world today. However, he has pledged to give most of his money to charity so that “the vast majority of my wealth would be spent helping as many people as possible.”
To achieve that goal, he founded the Bill & Melinda Gates Foundation Trust. “Our mission is to create a world where every person has the opportunity to live a healthy, productive life,” according to the Gates Foundation website. Through the end of 2023, the foundation has disbursed $77.6 billion since its inception, “addressing the toughest and most important problems.”
While the Trust continues to hold stakes in two dozen companies, 81% of its holdings at the end of the second quarter consisted of just four stocks.
1. Microsoft: 30%
It should come as no surprise to anyone that the Trust’s largest holding – by a wide margin – is Microsoft, the company Gates founded. The Foundation owns approximately 35 million shares of Microsoft stock, worth approximately $14.3 billion.
However, this is not your grandfather’s Microsoft. In addition to its existing software, browser and operating systems, the company is now a major player in a number of emerging industries. It is the second largest cloud infrastructure provider in the world, which also gives Microsoft the pole position in marketing artificial intelligence (AI) products and services to its cloud customers.
Management noted that Azure Cloud growth included “eight points versus AI services,” demonstrating that this strategy is generating additional revenue. These AI-related services, including the AI-powered digital assistant Copilot, could generate an additional $143 billion in revenue by 2027, according to analysts at Evercore ISS.
Then there’s Microsoft’s quarterly dividend, which the company has paid out consistently since 2004 and increased every year since 2011. The current yield of 0.8% may seem like peanuts, but that is compounded by price gains of 202% over the past five years (as of this writing). Furthermore, the payout ratio of less than 25% illustrates that there is likely much more potential upside.
Given the company’s track record of success, I understand why Gates has a soft spot for Microsoft. I believe it will remain one of his most profitable investments – that’s why I own shares.
2. Berkshire Hathaway: 23%
Fellow billionaire and philanthropist Warren Buffett, CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B)has joined Gates in his pledge to donate the vast majority of his assets to charity. Buffett signed the Giving Pledge in 2006 and has donated more than $43 billion to the Trust to date, including $5.3 billion in Berkshire Hathaway stock earlier this year. As a result, the Gates Foundation currently owns nearly 25 million shares, worth more than $11 billion.
Berkshire Hathaway stock represents instant diversification thanks to the company’s dozens of business interests and stock holdings – so it’s not surprising that it represents such a high percentage of the Trust’s shares. Moreover, Berkshire is raking in billions of dollars in dividend income every year and holds a whopping $277 billion in cash.
Given the diversity of assets, the continued windfall of dividend income, and Buffett’s track record – which is second to none – I think keeping that many Berkshire Hathaway shares in the Trust’s coffers is a wise choice.
3. Waste management: 15%
Gates is a fan of companies with strong pricing power and robust recurring revenue, and you’d be hard-pressed to find a better example than Waste management (NYSE: WM). Simply put, society will continue to produce waste for the foreseeable future. The Gates Trust owns more than 35 million shares, worth $7.2 billion.
Waste management is expanding beyond its roots in waste collection, recovering glass, paper, metal and plastic to be sent to recovery stations for recycling. The company also collects landfill gases from its sites to generate electricity, another growing source of revenue.
In the second quarter, revenues rose 5.5% year over year, while adjusted operating EBITDA (earnings before interest, taxes, depreciation and amortization) rose 10%, fueled by higher payments for recyclable materials and general price increases.
There is also the dividend to consider. Waste Management has been making consistent payments since 1998 and has increased its dividend for 21 years in a row. The current payout is 1.46% and has a payout ratio of just 46%, so there is plenty of room for future increases.
I don’t own Waste Management stock, but for income investors, I think it’s a smart choice.
4. Canadian National Railway: 13%
Gates and Buffett also share an affinity for railroads. When Berkshire bought Burlington Northern Santa Fe in 2009, Buffett said that railroads were moving goods “in a very cost-effective way… they’re doing it in an extremely environmentally friendly way… [releasing] Far fewer pollutants are released into the atmosphere.” Gates clearly agrees, as the Trust owns nearly 55 million shares Canadian National Railway (NYSE: CNI)worth approximately $6.2 billion.
Canadian National is unique in that it is the only transcontinental railroad in North America, connecting the Atlantic Coast, the Pacific Coast and the Gulf of Mexico. According to Buffett, railroads are four times more efficient than trucks, making them a more cost-effective option while reducing greenhouse gas emissions by 75% compared to regular trucks. There is also a strong economic moat and significant barriers to entry, making railways even more attractive.
Canadian National has a consistent track record of dividend payments, with annual increases since its initial public offering in 1995. The dividend has a current yield of 2.2% and the payout ratio of 38% suggests there is plenty of room for additional advantage.
I don’t need to be convinced of the value an investment in Canadian National Railway provides; I am already a shareholder.
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Danny Vena holds positions at Canadian National Railway and Microsoft. The Motley Fool holds positions in and recommends Berkshire Hathaway and Microsoft. The Motley Fool recommends Canadian National Railway and Waste Management and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has one disclosure policy.
Billionaire Bill Gates has 81% of his $48 billion portfolio in just four stocks was originally published by The Motley Fool