Bill Gates is one of the most well-known billionaires in the world. The Microsoft (NASDAQ: MSFT) founder was the first person to ever become a centibillionaire, reaching a net worth of $100 billion in 1999, well ahead of anyone else. (Jeff Bezos was next in 2017.)
But Gates is extremely generous with his wealth; he's one of the most philanthropic billionaires in the world. He stepped down from his position as CEO of Microsoft in 2000 to focus more on his nonprofit foundation. He and ex-wife Melinda Gates started the Bill & Melinda Gates Foundation that year to advance global healthcare and reduce poverty around the world. Over the last 30 years, the two of them have donated an estimated $47.7 billion of their wealth to their foundation and its predecessor.
The foundation's trust includes a highly concentrated equity portfolio that shows the influence of Gates, as well as longtime friend and former Gates Foundation trustee Warren Buffett. While it holds around $44 billion worth of assets, about two-thirds of that is held in just three stocks. Here's a closer look at Gates' top public investments for his foundation.
Gates owned 45% of Microsoft shares after its initial public offering in 1986. Today he owns less than 1% of the company. A lot of Gates' stock went to the Gates Foundation over the years, including a donation of roughly $5 billion worth of shares in 2022.
That donation brought the Gates Foundation's stake in Microsoft to more than 39 million shares. It's held on to the majority of those shares, with about 28.5 million left in the portfolio as of the end of 2024. Those shares are worth $11.2 billion, as of this writing.
Holding Microsoft over the last two years has been an excellent investment for the Gates Foundation and all its other investors. The stock has climbed more than 60% since the end of 2022, outperforming the S&P 500 (SNPINDEX: ^GSPC).
Microsoft's growth is fueled in large part by its positions in artificial intelligence (AI). The company owns one of the largest public cloud computing platforms, Azure, and its early investments in OpenAI gave it a leg up in creating tools for developers around generative AI.
Management said Azure AI services grew 157% year over year during Microsoft's most recent quarter, contributing 13 percentage points of growth to the cloud platform overall. Importantly, management said it remained capacity constrained, which suggests growth could accelerate in the second half of the year.
Microsoft is also one of the largest enterprise software providers in the world, led by its Microsoft 365 productivity suite, which includes Office, collaboration tools, and cloud storage. It offers its own line of AI-powered chatbots called Copilots to help users get more out of the software using natural language. Its Copilot for GitHub can help developers code more effectively and efficiently.
And Microsoft offers enterprise customers access to Copilot Studio to develop their own Copilots, harnessing their own data. Copilot adoption is helping expand the market for the already ubiquitous software suite while driving higher revenue per license.
Microsoft shares trade for about 26 times forward earnings estimates, as of this writing. While that's a premium to the overall market, it arguably deserves that premium. It's at the forefront of advances in AI in two areas, benefiting from the continued growth in spending on AI software and development. Its massive annual free cash flow ensures it can invest to meet the needs of its customers, while using excess capital to buy back shares and boost earnings per share.
Warren Buffett isn't just a friend of Gates or a former trustee for his foundation -- he's also one of its biggest donors. He's made an annual contribution to the Gates Foundation since 2006, always in the form of Berkshire Hathaway (NYSE: BRK.B) (NYSE: BRK.A) shares.
As of the end of 2024, the Gates Foundation held 19.7 million Class B shares of Berkshire Hathaway. That stake is worth $10.5 billion, as of this writing.
Shares of Berkshire Hathaway have performed extraordinarily well over the last couple of years, and it now stands at a record market value of $1.15 trillion. That's despite Buffett's moves in Berkshire's equity portfolio to trim positions in several notable holdings and pile more of its assets into cash and Treasuries. Had he not sold those stocks, Berkshire would be worth even more.
Berkshire's growth can be attributed to its owned and operated businesses, led by its insurance division. The company's operating earnings increased 27% last year, on top of 21% growth in 2023. Combined with strong performance in Berkshire's equity portfolio, it's pushed the value of the stock higher.
But Buffett's recent actions suggest he thinks the stock might be too expensive right now. The Berkshire board of directors changed the company's share repurchase program in 2018 to allow Buffett to buy back shares whenever he felt they were priced below their intrinsic value. He bought back shares every quarter until the third quarter last year. Shares have consistently traded above a price-to-book-value ratio of 1.5 since then, frequently exceeding 1.6.
As of this writing, Berkshire shares trade for 1.77 times book value. That's a valuation the stock hasn't reached in more than 15 years. While there are some good reasons for Berkshire to trade at a higher ratio to book value right now, considering it's not really using the insurance business for leverage in its equity investments, that price still seems very high.
Investors may be better off with other investments now and waiting for Berkshire's price to come back toward a safer valuation.
Waste Management (NYSE: WM) is a longtime holding for the Gates Foundation trust, and it has steadily added shares over time. It's a boring business that's relatively immune to economic slowdowns. (People will always have trash.) And it has a massive competitive moat that ensures it's not in danger of losing its steady revenue streams anytime soon. It's clear Gates was heavily influenced by Warren Buffett.
The Gates Foundation held 32.2 million shares of Waste Management as of the end of the fourth quarter. Those shares are worth approximately $7.4 billion as of this writing. It's worth noting that the trustees rarely sell shares of the stock, unlike its positions in Microsoft and Berkshire Hathaway. So, the holding could end up becoming a bigger portion of its portfolio in the future.
Waste Management is the largest waste collection and disposal company in the United States. That in and of itself is a great advantage for the business, as it's able to capture high-density routes, making its operations more efficient than smaller companies in its industry.
That scale also gives it the cash flow needed to expand via acquisition, which it's done strategically. Most recently, it acquired medical waste management company Stericycle. The new addition contributes to Waste Management's growth.
Management's 2025 outlook for 16.4% revenue growth includes 10.7 percentage points from acquisitions. Despite the acquisitions, the company sees 17.6% growth in free cash flow this year, giving it the confidence to raise its dividend 10% earlier this year.
But Waste Management's biggest competitive advantage is its dominant landfill ownership. Due to strict regulations, only a tiny handful of competitors can replicate its fully integrated waste hauling business. The industry is practically impenetrable to new competition. As such, Waste Management is well positioned to provide stable returns for investors, year in and year out.
The stock trades for an enterprise value-to-adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio of about 15 times management's 2025 outlook. That's a fair price to pay, especially for those looking for a defensive stock that can withstand the current uncertain macroeconomic environment.
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Adam Levy has positions in Microsoft. The Motley Fool has positions in and recommends Berkshire Hathaway and Microsoft. The Motley Fool recommends 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 a disclosure policy.
Billionaire Bill Gates Has 66% of His Foundation's $44 Billion Portfolio Invested in 3 Phenomenal Stocks was originally published by The Motley Fool
