With wealth surpassing $100 billion, Bill Gates stands amongst the world’s richest individuals. His philanthropic contributions to the Gates Foundation, established in 2000, have exceeded $60 billion, demonstrating remarkable generosity. The investment portfolio of the Gates Foundation combines technological expertise and wisdom from a legendary investor’s influence.Bill Gates’ personal investment holdings, which include substantial Microsoft shares (MSFT 0.60%) and various strategic investments, have largely funded these charitable contributions. Beyond Microsoft, Gates adopts a value-oriented investment approach, that appears to be influenced by his close associate and former Gates Foundation trustee and contributor, Warren Buffett, according to a report by The Motley Fool.The Foundation’s investment strategy reflects both Gates and Buffett’s financial philosophies, featuring a concentrated selection of the topmost investments. As a result, three exceptional stocks constitute approximately two-thirds of the foundation’s trust fund holdings. We take a look at them.Berkshire Hathaway (18.4%)Warren Buffett remains a significant contributor to the Gates Foundation, with his contributions since 2006 exceeding $43 billion. His donations specifically comprise Class B shares of Berkshire Hathaway. He retains company control through a strategic approach of converting high-voting Class A shares to Class B shares prior to donation.The Foundation operates under specific conditions set by Buffett, requiring annual grant payments equivalent to his donation amount plus 5% of trust assets. Despite these requirements, the Foundation has retained substantial Berkshire Hathaway holdings, possessing 17.1 million shares valued at approximately $8.3 billion at the first quarter’s end, the The Motley Fool report says.A significant portion of Berkshire’s worth is derived from its portfolio of publicly traded equities and cash holdings. Its total liquid investments amount to approximately $631.8 billion. Buffett maintains more than half of this amount in Treasury bills or cash whilst searching for valuable investment opportunities. However, due to Berkshire’s substantial size, only a limited number of companies remain as feasible investment targets.Microsoft (31.1.%)When Microsoft was established in 2000, Bill Gates initiated donations of company shares, consistently increasing his contributions over time. Despite utilising shares to support grants, the foundation has accumulated a significant position in the organisation. By the end of quarter one, the trust maintained approximately 28.5 million shares, valued at over £14 billion as of late June.The company’s shares have reached unprecedented levels recently, driven by its achievements in artificial intelligence (AI). Following a £10 billion investment in OpenAI in early 2023, Microsoft’s Azure emerged as the premier cloud computing service for developers seeking access to advanced AI models. The company has demonstrated exceptional performance, achieving 33% growth in its latest quarter. Additionally, Microsoft executives indicate that demand continues to exceed supply capacity, suggesting sustained growth prospects for the foreseeable future, the report said.Microsoft’s enterprise software division has experienced significant growth through AI integration. The company’s Microsoft 365 commercial segment has achieved substantial revenue increases, driven by expanded user base and enhanced pricing structures.The organisation has introduced specialised AI-driven assistants, known as Copilots, across various platforms including GitHub and Dynamics 365, enhancing business software functionality. Additionally, their Copilot Studio enables organisations to develop customised AI assistants using their proprietary data.These initiatives have resulted in robust revenue expansion and increased profitability through improved margins. With Azure’s continued prominence in Microsoft’s strategy, this positive trajectory is expected to continue.Waste Management (16.2%)The Gates Foundation trust’s investment portfolio largely mirrors the value-investing principles that brought success to Warren Buffett. Waste Management stands out as a prime example of this approach.Since 2002, Waste Management has remained a consistent component of the portfolio. This long-term investment has shown steady value appreciation over time, with minimal share disposals. At the conclusion of the first quarter, the trust maintained ownership of 32.2 million shares, currently valued at approximately £7.3 billion.The company’s appeal lies in its substantial competitive advantage. Its unrivalled network of landfills creates a barrier that competitors cannot overcome, given the stringent permitting requirements for new facilities. This position enables Waste Management to generate revenue from smaller waste collection firms requiring access to its disposal sites. Additionally, its operational efficiency benefits from economies of scale, enabling optimised collection routes and enhanced operational performance. These factors contribute to the company’s robust profit margins.The company’s surplus funds have enabled its expansion through acquisitions, notably Stericycle, now operating as WM Healthcare Solutions. During the latest investor presentation, the leadership team projected £50 million in additional revenue through cross-selling with Stericycle, complementing the £250 million in operational efficiencies.The leadership anticipates yearly revenue expansion of approximately 9%, alongside improved EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins through 2027. This financial performance will generate substantial free cash flow, enabling further strategic acquisitions, dividend increases, and share buybacks. The current enterprise value stands at roughly 15 times the projected EBITDA for the upcoming 12 months, suggesting reasonable valuation. This presents a viable investment option for those seeking dividend growth companies with robust free cash flow potential, the Motley Fool report added.
