Bill Gates Keeps Getting Richer. Here's the World's Richest Man's Secret

Bill Gates is the world's wealthiest man -- but there is one simple trick everyone can learn from his investing style.

It has been reported that in 2013, Bill Gates added an astounding $15.8 billion to his wealth, bringing his estimated net worth to nearly $80 billion, yet the way he did it may surprise you.

Beyond Microsoft
It's no secret Bill Gates has an enormous amount of wealth tied up in Microsoft (NASDAQ: MSFT  ) -- but he actually also has an immense amount of money in publicly traded companies that the average person can buy. In fact, according to Bloomberg, Microsoft stock accounts for only a little less than 17% of Gates' massive fortune.


Source: Robert Scoble on Flickr.

Of Gates' wealth -- most of which is held in Cascade Investment, his own investment firm -- about half of it is tied to the shares of publically traded companies, and the rest is invested privately.

In fact, his largest public holding outside of Microsoft isn't even an American company, but instead Montreal-based Canadian National Railway (NYSE: CNI  ) , which Gates has a $4.8 billion position in. The next behind Canadian National Railway is Republic Services (NYSE: RSG  ) , which is one of the largest waste disposal companies in the world, and in which Gates has a $2.9 billion position.

Source: Flickr/Auckland Photo News

Gates also has $2.9 billion worth of Ecolab (NYSE: ECL  ) , which is a global provider and manufacturer of sanitary products for a variety of industries and groups. Close behind that is another industrial agricultural manufacturer, Deere & Company (NYSE: DE  ) , of which Gates, through Cascades Investments, owns a little over 8% of the company, or $2.7 billion. 

What we can learn
At first glance, there's little rhyme or reason to what Gates holds. They all pay dividends, but outside of Republic Services and its 3.2% dividend yield, none of the previously mentioned companies do so at a rate that would make an income investor raise his eyebrows.

Deere & Company is certainly an interesting consideration from a value investor's perspective, as it only trades at a trailing 12 month price-to-earnings ratio of around 10. However, the rest of the companies trade anywhere between 19 and 35 times their price-to-earnings ratios. Certainly value investors wouldn't be drawn to these.

Seemingly, it isn't even as though a definitive conclusion can be drawn from what Gates or Michael Larson, the manager of Cascade Investment, does with the immense amount of wealth that Gates has accumulated.

Source: Issac Mao on Flickr.

Yet when Gates first tabbed Larson to be his fund manager, he said, "I wanted someone with a conservative philosophy about investing. I needed to have complete faith in the person I picked, since I didn't ever want to have to look over their shoulder."

Larson himself noted plainly in a Fortune article, "I'm not a risk taker." He went on to say, "my most important job is asset allocation. That's where the real money is made."

The beauty of diversification
Perhaps, the lack of continuity and overlap is Gates' method. His wealth is diversified enough to protect it and grow it when opportunity, no matter what it looks like, arises in the eyes of his trusted fund manager. It is critically important to remember that having a diverse portfolio is essential as you invest for the long term, and the example of the world's wealthiest man provides only further evidence of that.

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  • Report this Comment On January 14, 2014, at 6:45 PM, banmate7 wrote:

    I actually have tracked Cascade on a few very successful investments: CNI, PNM, DE, and CAT. Actually the latter 2 are relatively recent, but I've handily beaten the S&P500 with the 1st 2.

    I expect no different with DE & CAT. Aside from my own value investing analysis, Cascade is credible corroboration, on par with Warren Buffett. I think team Bill Gates knows what they are doing.

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