Most people have heard of Bill Gates, who is best known as the founder Microsoft (NASDAQ: MSFT) and, more recently, his activities as a billionaire philanthropist.
After leading the tech company he founded for more than a quarter of a century, the former CEO is leaving Microsoft to focus on his charitable efforts. Gates is currently worth $105.8 billion (as of this writing), according to Forbesmaking him the 14th richest person in the world today. However, he promised to give a lot of money to charity so that “a large part of my wealth will help a lot of people.”
To facilitate this goal, he established the Bill & Melinda Gates Foundation Trust. “Our mission is to create a world where everyone has the opportunity to live a healthy and productive life,” according to the Gates Foundation website. By the end of 2023, the foundation has paid out $77.6 billion since its inception, “solving the most difficult and most important problems.”
While the Trust continues to own shares in two dozen companies, to close the second quarter, 81% of its holdings were in just four stocks.
1. Microsoft: 30%
It won’t surprise anyone that the biggest Trust holder – by a wide margin – is Microsoft, the company Gates founded. The foundation owns about 35 million shares of Microsoft, worth about $14.3 billion.
However, this is not your grandfather’s Microsoft. Beyond legacy software, browsers, and operating systems, the company is now a major player in several emerging industries. It is the world’s second largest provider of cloud infrastructure, which also gives Microsoft a pole position in marketing artificial intelligence (AI) products and services to cloud customers.
Management notes that Azure Cloud growth includes “eight points from AI services,” indicating this strategy is driving additional business. 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.
There’s also Microsoft’s quarterly dividend, which the company has paid continuously since 2004 and has raised every year since 2011. The current yield of 0.8% may seem like nuts, but it’s coupled with a 202% share price gain over the past five years (as of writing this). Furthermore, a payout ratio of less than 25% indicates that there is more potential from here.
Given the company’s track record of success, I understand why Gates has a soft spot for Microsoft. I believe it will continue to be one of the most profitable investments – that’s why I own shares.
2. Berkshire Hathaway: 23%
Billionaire philanthropist Warren Buffett, CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B)has joined Gates in vowing to donate most of his assets to charity. Buffett signed the “Giving Pledge” in 2006 and has now donated more than $43 billion to the Trust, including $5.3 billion in Berkshire Hathaway stock earlier this year. As a result, the Gates Foundation now holds nearly 25 million shares, worth more than $11 billion.
Berkshire Hathaway’s stock reflects rapid diversification due to its dozens of business interests and corporate shareholdings – so it’s no surprise that it shows such a high percentage of Trust ownership. Furthermore, Berkshire rakes in billions of dollars in dividend income each year and holds $277 billion in cash.
Given the diversity of assets, consistent dividend income, and Buffett’s track record – which is unmatched – I think it’s a wise choice to keep Berkshire Hathaway shares in the Trust’s treasury.
3. Waste Management: 15%
Gates is a fan of companies with strong pricing power and strong recurring profits, and you’d be hard-pressed to find a better example than that 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 the roots of waste collection, recovering glass, paper, metal, and plastic to be diverted to reclamation stations for recycling. The company also collects landfill gas from the site to generate electricity, another source of income.
In the second quarter, revenue increased 5.5% year over year, while adjusted operating EBITDA (earnings before interest, taxes, depreciation, and amortization) increased 10%, supported by higher payments for recycling and overall price increases.
There are also dividends to consider. Waste Management has made consistent payments since 1998 and has increased its dividend for 21 consecutive years. The payout currently yields 1.46% and has a payout ratio of only 46%, so there is plenty of room for future increases.
I don’t have Stock Management, but for income investors, I think it’s a savvy 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 the railroads were transporting goods “in a very cost-effective way … they were doing it in an environmentally friendly way … (releasing) fewer pollutants into the atmosphere.” Gates obviously agrees, as the Trust owns almost 55 million shares of Canadian National Railways (NYSE: CNI)worth about $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 cheaper option and also reducing greenhouse gas emissions by 75% compared to trucks over the road. There are also strong economic moats and significant barriers to entry, which make railroads even more attractive.
Canadian National has a record of consistent dividend payouts, with increases every year since its 1995 IPO. Its current dividend yield is 2.2%, and its payout ratio of 38% suggests there’s plenty of room for upside.
I don’t need to be convinced of the value that an investment in Canadian National Railway provides — I’m already a shareholder.
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Danny Vena has held positions at Canadian National Railway and Microsoft. The Motley Fool has positions and recommends Berkshire Hathaway and Microsoft. The Motley Fool recommends National Railway and Waste Management of Canada 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 Owns 81% of His $48 Billion Portfolio in Just 4 Stocks was originally published by The Motley Fool
