Bill Gates is one of the most well-known billionaires in the world. The Microsoft founder became the wealthiest person in the world in the late 1990s, as the tech company's value soared. Despite giving away a large chunk of his wealth since the turn of the century, Gates' net worth still sits above $100 billion. But he plans to give away almost all of it to the Gates Foundation by 2045.
The Gates Foundation maintains a large endowment to fund improvements in health, gender equality, development, and education worldwide. A big part of that is its $38 billion equity portfolio. While Gates made his riches in technology, the foundation's equity portfolio reflects his personal investment style and the heavy influence of longtime friend and former Gates Foundation board member Warren Buffett. That includes a willingness to maintain a highly concentrated portfolio. In fact, about 60% of the portfolio is held in just three stocks.
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1. Berkshire Hathaway (26% of assets)
The Gates Foundation receives an annual injection of Berkshire Hathaway (BRKA 0.33%) (BRKB 0.38%) shares from Warren Buffett. This year's donation added 9.4 million Class B shares to the portfolio. Buffett's donation comes with the stipulation that the foundation must spend an amount equal to his donation plus 5% of its other assets each year to receive the next donation. While the portfolio managers have sold some Berkshire shares to help fund the foundation's operations, they've been able to hold a large chunk, and it's currently the biggest position in the portfolio.
That's worked out well for the Gates Foundation. While the share price has fallen since Buffett announced his retirement as CEO last May, the stock has held up well over the long run. Meanwhile, the company has produced solid operating results, led by its core insurance business. New CEO Greg Abel expressed disappointment with the BNSF railroad business, but noted improvements in its operating margin in 2025. The energy business produced results in line with 2024.
NYSE: BRKB
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Investors are waiting to see what will change and what will stay the same with Abel calling the shots. The newly installed CEO suggested that not much will change anytime soon under his leadership. He plans to maintain Berkshire's decentralized model, strong balance sheet, and culture. That said, some portfolio changes could be on the horizon with the recent exit of Todd Combs. Ted Weschler will also manage several billion more in assets going forward.
The continued increase in book value, combined with the stock's mostly sideways trading, has brought shares to one of their best valuations in years. At the current price, it may be worth picking up some shares. Abel notably just reinitiated Berkshire's share repurchase program and added $15 million worth of the stock to his personal trust.
2. WM (19%)
WM (WM +1.03%), formerly Waste Management, is a longtime holding for the Gates Foundation and reflects its focus on boring businesses with wide moats. There's certainly nothing glamorous or flashy about waste-hauling. But WM has built a vertically integrated business that operates at scale, giving it the ability to consistently raise prices, expand its margin, and use excess cash to grow the business via acquisition.
That's exactly what it's done in recent years. After acquiring Advanced Disposal in 2020, it now counts over 250 landfills and 300 transfer stations. That landfill position is practically insurmountable, as regulatory and economic pressure make it unreasonable to establish new landfills.
As a result, many smaller companies contract with Waste Management to use its facilities. In 2024, Waste Management acquired Stericycle, rebranding it as WM Healthcare Solutions. The move expands the operations horizontally, providing a new growth opportunity for the business.
NYSE: WM
Key Data Points
WM produced its best-ever operating margin in the fourth quarter. That's despite the fact that the new Healthcare Solutions business operates at a much lower margin for now. That result speaks to WM's ability to continue raising prices, which produced a 4.8% increase in revenue for its legacy business. Management expects further margin expansion next year as it continues to increase pricing, drive operational efficiency, and scale the Healthcare Solutions segment.
While the company is producing excellent operating results, the stock market hasn't let that go unnoticed. Shares now trade for 30 times forward earnings estimates. That's notably cheaper than its biggest competitors, but investors may want to look for a better entry point, as the stock has soared over the last few months.
3. Canadian National Railway (15%)
Canadian National Railway (CNI 2.28%) is a longtime holding for both the Gates Foundation and Gates himself. In fact, Gates donated 44.6 million shares of the stock to the foundation in 2022, pushing the portfolio's share count to almost 55 million. Despite a few shares being sold since, the stock remains the Gates Foundation's third-largest equity position.
Canadian National has historically stood out as one of the most efficient railroad operators. However, that lead has largely evaporated over the last 15 years, as many competitors have caught up and now produce operating margins that are similar or better. The biggest straggler in the industry may be Berkshire's BNSF. That's partly due to railroads copying CN's success and partly to industry consolidation, which can deliver significant operating efficiencies from scale and access enabled by new tracks. Importantly, the business is fairly protected, as it's impractical for a new entrant to put down new railroads and build a customer base from scratch.
NYSE: CNI
Key Data Points
Canadian National's rail network spans from coast to coast in Canada and down through the middle of the United States to New Orleans. It can bypass Chicago, enabling it to run trains more efficiently into the southern United States. While President Donald Trump's tariffs weighed on certain items, including forest products, metals, and automobiles, they were offset by improvements in grain shipments and gains in intermodal shipping. Overall, revenue climbed 2% year over year in the fourth quarter.
Management expects flat revenue for 2026, but it's driving down capital expenditures and expects further operational improvements. As a result, free cash flow should rise significantly, supporting its new share repurchase program.
If the company executes, it can deliver strong earnings-per-share growth despite the flat revenue outlook. With the stock already trading at a price-to-free cash flow ratio near or better than its biggest peers', with more cash flow improvements to come next year, the stock looks like a good value right now.
