Bill Gates has long been one of the wealthiest people in the world. His company, Microsoft(NASDAQ: MSFT), made him a billionaire the year after its IPO. If he held on to his 45% stake in the business he had back then, he’d be worth well over $1 trillion today.
But after nearly 25 years of successfully turning Microsoft into the biggest company in the world by market cap, Gates shifted his focus to philanthropic endeavors. In 1999, he and then-wife Melinda founded the Bill & Melinda Gates Foundation, which aims to improve healthcare and reduce poverty around the world. Gates has donated much of his wealth to the foundation over the past 25 years, and he plans to contribute almost the entirety of his assets to charitable causes over the course of his life.
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Gates isn’t alone in his pledge to give away his wealth. His friend Warren Buffett has joined him, and he has been a major contributor to the Gates Foundation since 2006. Buffett also served as a trustee until 2021. The foundation’s trust includes an equity portfolio worth around $45 billion, as of this writing.
Notably, about two-thirds of the portfolio is concentrated in just three stocks. Let’s take a closer look at each one.
The company Gates founded nearly 50 years ago holds the top spot in his foundation’s portfolio. The trust owns almost 29 million shares of the company, valued around $12 billion. The trust sold almost 6 million shares (about 17% of its previous holdings) during the third quarter to help fund its operations.
Those sales may have been well-timed, as Microsoft shares hit an all-time high in July. The stock is now more than 10% off that peak, and this could represent an incredible buying opportunity for investors.
Microsoft’s cloud computing business, Azure, is benefiting from growth in artificial intelligence spending, as well as the secular migration from on-premise to cloud computing by enterprise customers. When it comes to AI, Microsoft’s $10 billion investment in OpenAI helped position it to win share of the market. Developers have flocked to Azure’s AI platforms, and its user numbers are growing quickly.
Microsoft also maintains a stronghold in the enterprise productivity software business. The addition of Copilot to GitHub, Office 365, and its broader software portfolio has enabled it to grow revenue for the cash cow business.
Microsoft’s forward P/E ratio sits around 31.5, as of this writing. While that’s well above the average stock in the S&P 500, Microsoft is worth the premium price. It’s leveraging its AI investments to grow two businesses at scale. Meanwhile, it’s using the considerable cash flows it generates to buy back shares, boosting the value of future earnings to shareholders.
As mentioned, Warren Buffett makes an annual contribution to the Gates Foundation. This year’s donation came in the form of 9.9 million Berkshire Hathaway Class B(NYSE: BRK.B) shares. Buffett converts his super-voting Berkshire Hathaway Class A(NYSE: BRK.A) shares into Class B shares in order to donate his wealth without losing control of his company.
As of the end of the third quarter, the Gates Foundation held just over 22 million shares in its portfolio, valued today at around $10.5 billion. That number will likely decline through next summer (before Buffett’s next donation), as he includes a very specific stipulation: The Gates Foundation must spend every penny he donates, plus an additional 5% of its net assets each year. The trust notably sold almost 2.5 million shares last quarter.
Much of Berkshire Hathaway’s value is tied up in its massive investment portfolio. On top of an equity portfolio worth about $296 billion as of this writing, Berkshire also held about $325 billion in cash and Treasury bills as of the end of the third quarter. That cash pile is ballooning as Buffett sells several major holdings in the portfolio.
Meanwhile, Berkshire’s wholly owned businesses make up the balance of the trillion-dollar company. They’ve performed well in 2024, increasing operating income by 17% through the first nine months of the year. Combined with strong gains in the rest of the market, it’s no surprise the stock is up about 33% year to date.
Buffett himself appears to believe the stock has gotten ahead of itself. He didn’t repurchase a single share of Berkshire Hathaway last quarter despite authorization to buy back shares as long as he believes it trades below its intrinsic value. While Berkshire’s stock does look a bit expensive at 1.6 times its current book value, it’s worth noting that book value could grow quickly, given strong operating results and the potential investment of that $325 billion in dry powder.
Even at the current premium, the stock might be worth buying for some investors.
Waste Management(NYSE: WM) was one of the first equity holdings in the Gates Foundation’s trust fund. Today, it makes up around 16% of the portfolio. Its 32 million shares are worth over $7 billion, as of this writing.
Last quarter, Gates sold 3 million shares of Waste Management, reducing the portfolio’s position by 8%. That’s the first time Gates has reduced his position in the stock since 2007.
Waste Management holds a dominant position in the waste disposal industry thanks to its landfill ownership. The challenges for a newcomer trying to access or create new landfills is practically insurmountable, giving Waste Management a wide moat around its business. Its scale gives it higher-density routes for trash and recycling pickup, which improves its profitability relative to smaller competitors.
Importantly, management has executed well. It’s growing pricing faster than inflation while keeping its cost to serve low. As a result, it’s seeing expanding profit margins. Meanwhile, it’s using excess capital to strategically acquire smaller operators to grow its scale or adjacent businesses to expand its operations. Most recently, it acquired medical waste specialist Stericycle.
The stock currently trades at an enterprise value-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple above 17. That’s a multiple it hasn’t seen since the start of the Gates Foundation, save a short period in late 2021. It’s traded closer to a 15 multiple, on average, over the last five years.
That said, management has an opportunity to unlock a lot of value with its Stericycle acquisition and additional acquisitions in the future. What might look expensive today could turn out to be a good value.
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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.
