Bill Gates' $46 Billion Trust: A Closer Look at His Investment Strategy

Billionaire Bill Gates Has 33% of His $46 Billion Foundation Invested In This Once-In-A-Generation Artificial Intelligence (AI) Stock | The Motley Fool

Microsoft is currently the largest holding in the Bill & Melinda Gates Foundation Trust portfolio. One of the most famous entrepreneurs and philanthropists in recent history is Bill Gates. As a co-founder of Microsoft (MSFT -1.58%), he helped pioneer modern computing and revolutionize how people communicate and work. While he no longer manages the day-to-day business at Microsoft, Gates is still an active businessman. He and his ex-wife, Melinda French, built a charitable trust that is now worth roughly $46 billion. Perhaps unsurprisingly, Microsoft shares make up the largest fraction of the Bill & Melinda Gates Foundation Trust -- nearly one-third of the portfolio's total value. Let's take a look at Microsoft's business, and assess why the technology stock could be a great buy for long-term investors. Microsoft was founded 49 years ago out of a Harvard dorm room. Initially known for its Windows operating system, Microsoft has evolved into a much more sophisticated enterprise over the last half-century. The company has made a number of strategic acquisitions that have helped it become one of the world's most diversified technology platforms. Today, Microsoft owns professional social networking site LinkedIn as well as video game giant Activision Blizzard. While LinkedIn opened Microsoft up to a variety of different customer bases including sales and marketing professionals and corporate executives, Activision Blizzard represented an interesting supplement to the company's existing video game footprint in Xbox. Moreover, Microsoft is one of the most ubiquitous workplace productivity platforms on the market. The company's Office Suite includes some of the most commonly used productivity software applications in the workplace, among them Excel and PowerPoint. In addition, the company's popular Teams service competes with Zoom, Salesforce, and other video conferencing and chat suites. But perhaps Microsoft's biggest recent success has been with cloud computing. Despite intense competition from Amazon and Alphabet, the Azure cloud unit consistently remains one of Microsoft's top-performing sources of growth. Furthermore, following a $10 billion investment in ChatGPT developer OpenAI, Microsoft is making it clear that artificial intelligence (AI) will become increasingly ingrained into its ecosystem and represents the next frontier in the company's evolution. The chart below illustrates the total return of a $1,000 investment in Microsoft stock at the time of its initial public offering. Clearly, owning Microsoft for the long haul has been both a lucrative and wise decision. However, holding onto any single stock and reinvesting dividends for nearly 50 years requires unwavering financial discipline. Microsoft shares currently trade at a price-to-earnings (P/E) ratio of 37.8. By contrast, the average P/E of the S&P 500 is only 27.5. Not only is Microsoft stock trading at a significant premium to the broader market, but its P/E ratio and its price-to-free-cash-flow (P/FCF) multiple are both near their five-year highs. Simply put, Microsoft is not a cheap stock. However, that doesn't necessarily make it a poor opportunity. In fact, I'd argue that Microsoft's premium is well-deserved. The company has proven over the course of decades that it can consistently innovate and introduce products and services that will be used by consumers across many different demographics and end markets. The long-term returns of owning Microsoft stock have been hard to rival, and I think the company's newest chapter is just beginning to be written. AI is here to stay in some form or fashion for years to come, and Microsoft has a deep ecosystem into which it can integrate new AI-powered services -- from the workplace to personal computing, social networking, gaming, and more. Just as the company disrupted and revolutionized personal computing and cloud infrastructure, I see AI as a major tailwind for Microsoft's business over the next several decades. While the stock may be a bit pricey, it's hard to imagine a case in which Microsoft's growth prospects suddenly plateau or diminish. I think now would be a great time to scoop up shares of Microsoft and prepare to hold for the long run as the AI narrative continues to play out.

Billionaire Bill Gates Has 50% of His $46 Billion Trust Invested in 2 Brilliant Stocks

The Bill and Melinda Gates (BMG) Foundation is one of the largest charitable organizations in the world. As of December 2023, it had issued grants totaling nearly $78 billion to help alleviate poverty, improve health, support education, and combat inequities around the world. That charitable giving is funded by the BMG Foundation Trust, which manages money donated by Bill Gates, Melinda French, and Warren Buffett. Investors should keep the trust on their radar because it returned 47% during the three-year period that ended in March 2024, while the S&P 500 (SNPINDEX: ^GSPC) returned just 32%. The BMG Foundation Trust had 50% of its $46 billion portfolio spread across two stocks as of March: 34% in Microsoft (NASDAQ: MSFT) and 16% in Waste Management (NYSE: WM). Those have been brilliant investments, almost doubling the gains in the S&P 500 over the last three years. And Bill Gates clearly has confidence in their future. Microsoft: 34% asset allocation Microsoft is the largest software vendor and second-largest cloud infrastructure and platform services (CIPS) provider. The company accounted for 16.8% of cloud spending in 2023 when infrastructure, platform, and software services are considered collectively, up from 16.5% in 2022. The next closest competitor was Amazon Web Services, with 12.4% market share, according to research from IDC. Microsoft's dominance in software comes from its business-productivity and enterprise resource-planning platforms Microsoft 365 and Dynamics 365, respectively. The company has created new monetization opportunities in both ecosystems with generative artificial intelligence (AI) copilots. The IDC recently recognized Microsoft as a leader in conversational AI software. Microsoft Azure's strength in CIPS comes from its data base, cybersecurity, and hybrid cloud products, as well as AI and machine learning services. A recent survey from Morgan Stanley identified Azure as the CIPS provider most likely to gain market share in the coming years. "The company's leadership in the shift to the public cloud is now being compounded by an early leadership positioning in generative AI," Morgan Stanley analysts wrote in a recent note. Microsoft reported good financial results in the third quarter of fiscal 2024 (ended March 2024). Revenue rose 17% to $61.9 billion, and earnings under generally accepted accounting principles (GAAP) jumped 20% to $2.94 per diluted share. Those strong numbers were driven by momentum in enterprise software and cloud services, fueled in part by demand for AI. Wall Street currently expects the company to grow earnings by 14% annually over the next three to five years. That consensus estimate makes its current valuation of 38.3 times earnings look fairly expensive, but not absurdly so. Investors eager to own Microsoft stock can start with a small position today, but they should aim to make future purchases at less expensive valuations. Waste Management: 16% asset allocation Waste Management is the largest provider of waste collection and disposal services in North America as measured by revenue. The company controls 28% of U.S. landfill volume, while its closest competitor controls 20%. Brian Bernard at Morningstar says its vast network of transfer stations and landfills has historically supported pricing power, and he believes that this economic moat is "nearly impossible to replicate given immense regulatory hurdles." More broadly, investors should appreciate Waste Management because it provides essential services, meaning demand should persist to some degree through economic ups and downs. That defensive quality has made it more resilient than the average S&P 500 company during stock market downturns. As shown in the chart below, Waste Management has outperformed the S&P 500 by an average of 10 percentage points during bear markets since 2000. Data source: Yardeni Research, Ycharts. Waste Management reported mixed results in the first quarter. Revenue increased 5.5% to $5.2 billion, falling short of the 6.7% sales growth Wall Street anticipated. But GAAP earnings still jumped 35% to $1.75 per diluted share, easily beating the 15% growth forecast by analysts. The waste management sector is expected to grow at 5.4% annually through 2030, according to Grand View Research. Wall Street expects Waste Management to grow earnings per share by 12% annually over the next three to five years. That estimate makes the current valuation of 36.5 times earnings look rather expensive, especially when the three-year average is 33 times earnings. Personally, I would avoid this stock until it trades at a discount to its average price-to-earnings multiple over the last three years. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Microsoft wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $722,626!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Amazon. The Motley Fool has positions in and recommends Amazon 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. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Billionaire Bill Gates Has 50% of His $46 Billion Trust Invested in 2 Brilliant Stocks | The Motley Fool

The Bill and Melinda Gates Foundation Trust outperformed the S&P 500 over the last three years, and large positions in Microsoft and Waste Management were a big reason why. The Bill and Melinda Gates (BMG) Foundation is one of the largest charitable organizations in the world. As of December 2023, it had issued grants totaling nearly $78 billion to help alleviate poverty, improve health, support education, and combat inequities around the world. That charitable giving is funded by the BMG Foundation Trust, which manages money donated by Bill Gates, Melinda French, and Warren Buffett. Investors should keep the trust on their radar because it returned 47% during the three-year period that ended in March 2024, while the S&P 500 (^GSPC 1.08%) returned just 32%. The BMG Foundation Trust had 50% of its $46 billion portfolio spread across two stocks as of March: 34% in Microsoft (MSFT 1.33%) and 16% in Waste Management (WM 0.29%). Those have been brilliant investments, almost doubling the gains in the S&P 500 over the last three years. And Bill Gates clearly has confidence in their future. Microsoft is the largest software vendor and second-largest cloud infrastructure and platform services (CIPS) provider. The company accounted for 16.8% of cloud spending in 2023 when infrastructure, platform, and software services are considered collectively, up from 16.5% in 2022. The next closest competitor was Amazon Web Services, with 12.4% market share, according to research from IDC. Microsoft's dominance in software comes from its business-productivity and enterprise resource-planning platforms Microsoft 365 and Dynamics 365, respectively. The company has created new monetization opportunities in both ecosystems with generative artificial intelligence (AI) copilots. The IDC recently recognized Microsoft as a leader in conversational AI software. Microsoft Azure's strength in CIPS comes from its data base, cybersecurity, and hybrid cloud products, as well as AI and machine learning services. A recent survey from Morgan Stanley identified Azure as the CIPS provider most likely to gain market share in the coming years. "The company's leadership in the shift to the public cloud is now being compounded by an early leadership positioning in generative AI," Morgan Stanley analysts wrote in a recent note. Microsoft reported good financial results in the third quarter of fiscal 2024 (ended March 2024). Revenue rose 17% to $61.9 billion, and earnings under generally accepted accounting principles (GAAP) jumped 20% to $2.94 per diluted share. Those strong numbers were driven by momentum in enterprise software and cloud services, fueled in part by demand for AI. Wall Street currently expects the company to grow earnings by 14% annually over the next three to five years. That consensus estimate makes its current valuation of 38.3 times earnings look fairly expensive, but not absurdly so. Investors eager to own Microsoft stock can start with a small position today, but they should aim to make future purchases at less expensive valuations. Waste Management is the largest provider of waste collection and disposal services in North America as measured by revenue. The company controls 28% of U.S. landfill volume, while its closest competitor controls 20%. Brian Bernard at Morningstar says its vast network of transfer stations and landfills has historically supported pricing power, and he believes that this economic moat is "nearly impossible to replicate given immense regulatory hurdles." More broadly, investors should appreciate Waste Management because it provides essential services, meaning demand should persist to some degree through economic ups and downs. That defensive quality has made it more resilient than the average S&P 500 company during stock market downturns. As shown in the chart below, Waste Management has outperformed the S&P 500 by an average of 10 percentage points during bear markets since 2000. Data source: Yardeni Research, Ycharts. Waste Management reported mixed results in the first quarter. Revenue increased 5.5% to $5.2 billion, falling short of the 6.7% sales growth Wall Street anticipated. But GAAP earnings still jumped 35% to $1.75 per diluted share, easily beating the 15% growth forecast by analysts. The waste management sector is expected to grow at 5.4% annually through 2030, according to Grand View Research. Wall Street expects Waste Management to grow earnings per share by 12% annually over the next three to five years. That estimate makes the current valuation of 36.5 times earnings look rather expensive, especially when the three-year average is 33 times earnings. Personally, I would avoid this stock until it trades at a discount to its average price-to-earnings multiple over the last three years.