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Since leaving his post as Microsoft CEO in 2000, Bill Gates has become one of the world’s most visible philanthropists. He does most of his charitable giving through the Bill and Melinda Gates Foundation, which manages an estimated $45 billion portfolio.
A $45 billion portfolio is massive by any stretch of the imagination and you might naturally expect the Gates Foundation to be active traders. However, the Gates Foundation’s most notable purchases were 1,000,000 shares in two transportation sector stocks. Both purchases indicate the Gates Foundation may be anticipating a strong economy in 2025.
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Federal Express (FedEx) is perhaps the most recognizable name in global overnight shipping. That might be what makes the company famous, but it’s far from the only shipping sector where FedEx has a large presence. According to Transport Topics, FedEx also operates America’s biggest less-than-truckload (LTL) service. This sector covers business-to-business and business-to-consumer shipping for small goods and is especially lucrative when the economy is buzzing.
With that in mind, the Gates Foundation’s purchase of 1,000,000 shares reveals a belief that the economy will be stronger in 2025 and that FedEx shares may be undervalued. Although FedEx shares are up about 17% for the year, they took a steep tumble in September. The falloff was largely due to a disappointing Q3 2024 earnings report that saw FedEx lower its expectations for 2025.
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FedEx shares have recovered to some extent since that slide and now trade at $302.68, roughly $10 shy of its 2024 high of $312.54. The consensus of the most recent FedEx analyst ratings at Benzinga shows Citigroup and Barclays sets an average price target of $332.33. That could set the Gates Foundation up to make a good profit while earning a 1.82% dividend on its 1,000,000 shares.
You may not have heard of Paccar, but if you have ever seen a big diesel truck by Kenworth or Peterbilt driving down the freeway, you are familiar with Paccar products. Paccar is the parent company of some of the world’s largest commercial truck manufacturers. Like FedEx, Paccar shares hit their high of $123.93 in mid-2024 before sliding in the fall due to a somewhat underwhelming Q3 2024 earnings report.
However, a deeper look at the numbers shows reasons for optimism about the future. Although Paccar’s earnings were down by about 5%, the company’s $8.2 billion in revenue exceeded the consensus analyst expectations of $7.65 billion. Earnings per share (EPS) also fell from $2.34 to $1.85, which edged out the consensus expectations of $1.82.
Paccar shares have mounted a strong rally from the 2024 low of $90.76 in August to their current price of $117. That puts Paccar shares $6.93 short of their high-water mark for the year. Analysts from RBC Capital, Citigroup and Evercore ISI Group all have a “buy now” rating on Paccar, with a consensus share price target of $122.67. Paccar shareholders will also earn a 1.03% dividend.
The Gates Foundation is anticipating a robust economy in 2025. In that scenario, FedEx’s overnight and LTL shipping will do brisk business. The same is true for Paccar if lots of goods are being shipped via heavy trucks. If the Gates Foundation is right about the economy, purchasing 1,000,000 shares of FedEx and Paccar will prove to have been very astute trades.
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