When it comes to billionaire investors, Bill Gates is pretty much a household name. He made his fortune as the CEO of Microsoft (MSFT 2.23%), the software company he co-founded. Gates is worth an estimated $127.7 billion (as of this writing), according to Forbes, making him the world's eighth richest person world.
After running Microsoft for 25 years, Gates turned his attention to philanthropic ventures. He joined Warren Buffett in signing The Giving Pledge, agreeing to donate "virtually all" of his wealth to charitable causes. To support these goals, he established the Bill & Melinda Gates Foundation Trust "to create a world where every person has the opportunity to live a healthy, productive life." The foundation has disbursed $53.8 billion over the past 24 years, "taking on the toughest, most important problems."
As a result of the regular inflows of Gates's wealth, dividend payments, and outflows to charitable ventures, the trust's stock holdings and the amounts change regularly. While the portfolio has stakes in two dozen companies in all, the vast majority is held in just four stocks.
Image source: Getty Images.
1. Microsoft: 33%
It should come as no surprise that Microsoft stock tops the list since Gates donates chunks of his stock holdings to the trust. The Gates Foundation holds more than 38.2 million shares of Microsoft stock worth $15.45 billion.
Yet Microsoft has changed drastically since Gates helmed the company. Current CEO Satya Nadella has dragged the company kicking and screaming into the 21st century, first shifting its strategy to the cloud, then quickly embracing artificial intelligence (AI), setting the company up for future success.
To close out last year, Microsoft Azure was the world's No. 2 cloud infrastructure provider with 26% of the market and boasted the fastest growth among its "Big Three" cloud rivals. While Azure grew revenue 30% year over year in the calendar fourth quarter, Amazon Web Services (AWS) and Alphabet's Google Cloud grew 13% and 26%, respectively. Furthermore, Microsoft's total cloud revenue grew 24% year over year to $33.7 billion, accounting for 54% of Microsoft's total revenue.
The company's move into generative AI gave birth to Microsoft Copilot, a suite of digital helpers deeply embedded into Microsoft's products and services and designed to increase worker productivity. AI is also having a halo effect on its cloud, and in the most recent quarter, six points of Azure's growth was attributed to AI services. Analysts at Evercore ISI calculate that the company's AI strategy could generate incremental revenue of $143 billion by 2027.
Microsoft has paid a dividend every year since 2004 and has increased its payout in each of the past 14 years. Its yield of just 0.71% is augmented by a stock price that has increased 225% over the past five years -- more than triple the 72% gains of the S&P 500. And with a payout ratio of just 25%, there a distinct likelihood its dividend will continue to increase for years to come.
2. Berkshire Hathaway: 17%
Warren Buffett has pledged that, over time, he will donate his vast mountain of Berkshire Hathaway (BRK.A 0.17%) (BRK.B 0.30%) stock -- and the rest of his wealth -- to charity. Between 2006 and 2022, his contributions to the Gates Foundation Trust have climbed to $36 billion. Currently, the trust holds 19.9 million Berkshire shares in a stake worth nearly $7.96 billion.
Rather than immediately converting the shares to cash, the foundation has opted to hang onto the stock, which is backed by more than three dozen stock holdings and 67 subsidiary companies. In 2023, this conglomerate generated revenue of $364 billion, an increase of 20% year over year, resulting in net income of $97 billion and operating cash flow of $49 billion, a remarkable achievement considering the expanse of its vast holdings.
Its collection of insurance companies, which include National Indemnity, GEICO, General Re, Berkshire Hathaway Reinsurance, and Alleghany, are the crown jewels of Berkshire's holdings. The company's shareholder letter noted these businesses "performed exceptionally well last year, setting records in sales, float, and underwriting profits," and ultimately accounting for 40% of its $37 billion in operating income.
Those factors help explain why Berkshire Hathaway continues to be among Gates' largest stakes.
3. Waste Management: 16%
Buffett is also a fan of boring, low-profile businesses with recurring business models -- which is likely something he passed on to Gates. This is certainly an appropriate definition for trash collection. That's probably why the trust owns roughly 35.2 million shares of Waste Management (WM 0.60%) stock, currently worth more than $7.23 billion.
Trash and recycling collection certainly isn't exciting, but the recurring nature of the service results in predictable revenue, which won't be changing any time soon. Waste Management is expanding beyond its humble roots, harvesting landfill gases, which are then refined and used to generate electricity or fuel its trash collection vehicles.
The dividend is another attraction. Waste Management has boosted its dividend for 15 successive years, and currently yields 1.4%. Waste Management uses just 49% of its profits to fund the payout, leaving ample opportunity for future increases.
4. Canadian National Railway: 15%
Warren Buffett has long had an affinity for railroads, something that has probably rubbed off on Gates, particularly given the long association. Berkshire Hathaway counts Burlington Northern Santa Fe among its subsidiaries after Buffett bought the company in 2009 for $26 billion. At the time, Buffett said that not only do railroads move goods "in a very cost-effective way ... they do it in an extraordinarily environmentally friendly way ... [releasing] far fewer pollutants into the atmosphere."
That same reasoning likely helped influence Gates's decision to hold 54.8 million shares of Canadian National Railway (CNI 1.21%) worth nearly $6.97 billion.
The decision is easy to understand. Railroads help form the foundation of a robust economy, moving a variety of goods, even those that aren't suitable for competing forms of travel. Railroads are also about four times more fuel efficient than trucks, resulting in fewer greenhouse gas emissions. Buffett, and by association, Gates, loves companies with wide economic moats and high barriers to entry -- the very definition of a railroad.
Canadian National also has a long dividend history, with payouts dating back to 2011. It boasts a current yield of nearly 1.9% and a sustainable payout ratio of just 37%, which suggests there are further increases to come.
