Bill Gates is one of the best-known billionaires in the world. He reached an unforeseen level of wealth in the late 1990s as Microsoft (MSFT 1.15%) soared to become the most valuable company in the world. Gates' net worth topped $100 billion in 1999, 18 years before anyone else would reach that level. By 2000, Gates stepped down as CEO of the company he founded to focus more on philanthropy and the newly created Bill & Melinda Gates Foundation (a combination of three previous family foundations).
Today, the Gates Foundation manages a trust with a publicly traded portfolio valued at $45 billion, as of this writing. While it contains holdings in 25 stocks, including several stocks donated directly from Gates' personal portfolio, nearly two-thirds of that portfolio is held in just three outstanding stocks.
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1. Microsoft (29% of assets)
It's probably not a huge surprise that the largest holding in the Microsoft founders' foundation's portfolio is the software company itself. Gates seeded the foundation with $5 billion worth of Microsoft stock in 2000, and he's donated even more since then. Most recently, he added $5 billion worth of shares in 2022. That pushed the foundation's total share count to about 39 million.
As of the end of the first quarter, the Gates Foundation continued to hold about 28.5 million shares. Those are worth about $13 billion as of this writing.
Microsoft has been one of the biggest beneficiaries of growing artificial intelligence (AI) spending. Its early investment in OpenAI put it in a position to make Azure, its cloud computing platform, the top destination for developers looking to build on the models advanced by OpenAI and others.
That's spurred a ton of growth in the cloud computing business over the last two years, and there's no sign of slowing down anytime soon. In fact, Microsoft says it remains capacity-constrained on its AI compute, despite spending heavily to meet demand.
Azure's fiscal 2025 Q3 revenue climbed 33% year over year, according to Microsoft's most recent quarterly earnings release. Roughly half of that growth was driven by AI services.
Microsoft's enterprise software business also benefits from AI, as Microsoft continues to improve its Copilot software. It offers specific AI-powered Copilot assistants for software development, healthcare, cybersecurity, and even gaming. Copilot in Microsoft 365 gives the company another way to sell its subscription software while increasing prices. Meanwhile, its Copilot Studio allows enterprises to develop their own AI agents using Microsoft's foundation. That's spurred renewed growth in its enterprise software sales.
Microsoft's forward P/E ratio of 34 is a significant premium to the rest of the market. However, with its leadership in AI on two fronts, plus a massive share repurchase program (and the cash flow to support it), that valuation is well deserved. As such, it could easily remain a top holding for the Gates Foundation for years to come.
2. Berkshire Hathaway (19%)
Gates has been friends with Berkshire Hathaway (BRK.A -0.48%) (BRK.B -0.64%) CEO Warren Buffett for a long time. Gates served on Berkshire's board of directors from 2004 to 2020, and Buffett served as a trustee for the Gates Foundation from 2006 to 2021. Buffett still makes an annual donation to the foundation in the form of Berkshire Hathaway Class B shares.
As of the end of the first quarter, the Gates Foundation held just over 17 million shares, worth roughly $8.7 billion as of this writing. The trustees sold some shares in the first quarter and will likely continue to sell those shares to fund grants and operations. Buffett has given his donation each summer with the stipulation that the foundation must use the entire value, plus 5% of the foundation's assets.
Holding onto a good chunk of Berkshire Hathaway shares has worked out well for the foundation, though. The diversified holding company has seen its value soar as its stock portfolio has performed well and its wholly owned operating businesses produce significant profits.
Over the last two years, Buffett has strategically sold off many of Berkshire's largest public equity holdings as their valuations grew more and more expensive. The proceeds from the stock sales combined with the regular profits and cash flows from Berkshire's operated businesses has pushed the cash holdings on Berkshire's balance sheet to a whopping $347.7 billion. That's caused some concern among investors. But amid the current uncertainty, it provides a safe haven for many who trust Buffett's and Berkshire's process.
Still, the stock is expensive, and Buffett wouldn't argue with that. He's neglected to buy back shares of the stock for the last year. With a price-to-book ratio of around 1.7, it trades well above its historical average. That said, with its massive pile of cash, the company deserves a premium to its book value, as the cash has a lot more potential in the hands of Buffett than most other investors.
3. Waste Management (17%)
Waste Management (WM -0.68%) is one of the longest held stocks for the Gates Foundation trust fund. It's emblematic of the kind of boring businesses that make up the vast majority of the portfolio outside of Microsoft. It's recession resistant (people always have trash to take out) and it sports a wide competitive moat.
As of the end of March, the trust held just over 32 million shares. Those are worth about $7.5 billion as of this writing.
Waste Management's biggest advantage is its dominant landfill position. It's practically impossible for a new entrant to come into the market due to regulatory hurdles, so Waste Management isn't in danger of seeing any of its routes taken by competitors. It's managed to expand through acquisitions, including the recent acquisition of Stericycle, now WM Healthcare Solutions. Management expects to extract $250 million in synergies from the acquisition while expanding the business through cross-sales.
For now, the acquisition is weighing slightly on Waste Management's operating margin, which fell 2 percentage points year over year to 27.7%. That's due to just 12.3% margins for the new healthcare unit, and a slight contraction for the legacy business. The margins should return closer to 30% as Waste Management realizes those synergies, grows the business, and continuously increases pricing for its legacy business.
Waste Management currently sports an enterprise value of about 15.5 times management's outlook for 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA). At that price, it's fairly valued, especially when compared to its competitors that are priced higher while experiencing shrinking volumes.
