Billionaire Bill Gates has 69% of his foundation’s $48 billion portfolio invested in just 3 phenomenal stocks

When Bill Gates became a billionaire in 1987, he was the youngest person to reach that milestone. He reached billionaire status at age 23, and 12 years later became the first cent-billionaire, achieving a net worth of $100 billion well ahead of anyone else.

Gates and his then-wife, Melinda, established a charitable foundation in 2000 to improve healthcare and reduce poverty around the world, the Bill and Melinda Gates Foundation. Over the past 25 years, Gates has donated much of his fortune to the foundation and plans to donate all of his assets to charity throughout his lifetime.

Gates’ fellow billionaire, Warren Buffett, has pledged donations to the Gates Foundation since 2006, but those contributions will end after his death. Buffett also served as a trustee of the foundation until 2021 and likely influenced how the trust invests its funds.

The trust’s stock portfolio is currently valued at around $48 billion, but more than two-thirds of that amount, about 69 percent, is invested in just three stocks.

1. Microsoft (31%)

Gates is donating $20 billion to his foundation in 2022, and it appears that much of the donation came in the form of Microsoft (MSFT 0.84%) stock. Gates is still one of the largest shareholders of the company he founded, and the company’s stock still represents a large part of his fortune. The trust added about 38 million shares to its portfolio in 2022, worth about $8.9 billion at the time.

The trust has nearly 35 million shares left in its portfolio, and the value has risen to $14.8 billion. Keeping those Microsoft shares worked well for the foundation (and Gates). Shares are up more than 60% since July 2022, when Gates made his donation.

Microsoft’s strong performance over the past two years can be attributed to its role in the rise of generative artificial intelligence. The company increased its investment in generative AI leader OpenAI in early 2023 and has become a leading cloud computing platform for AI developers as a result of its close ties with the company. Microsoft’s cloud platform Azure saw its AI customers grow nearly 60 percent year-over-year in its most recent quarter, surpassing a total of 60,000.

Meanwhile, Microsoft is injecting AI capabilities into its industry-leading software — 77,000 organizations use Copilot software to improve productivity and creativity in Github, Office, and their own native apps. And customer numbers continue to grow rapidly, up 60% sequentially in the most recent quarter.

Microsoft shares are currently trading at about 32 times forward earnings estimates. This is definitely a premium for S&P 500but its stock is worth a premium price. Its position as the leading cloud platform for AI developers, combined with the massive enterprise software customer base to sell Copilot, gives it a long runway for growth. Additionally, its cash position and free cash flow generation give it plenty of capital to use to take advantage of growth opportunities.

2. Berkshire Hathaway Class B Shares (23%)

As mentioned, Warren Buffett is a regular donor to the Gates Foundation, and his most recent donation came last quarter in the form of 9.9 million Class B shares of Berkshire Hathaway (BRK.B -0.72%). Buffett uses the ability to convert super voting Berkshire Hathaway Class A (BRK.A -0.54%) shares of Class B stock before donating to maintain control of the company.

Buffett’s donation pushed the trust’s position in Berkshire Hathaway to nearly 25 million shares. Those shares are worth about $11.2 billion today.

But the Berkshire trust’s position is likely to shrink over the next year. Buffett’s donation requires the Gates Foundation to spend every penny it donates plus another 5% of its net assets. Gates has pledged to increase the foundation’s spending from $6 billion in 2022 to $9 billion by 2026 and plans to spend $8.6 billion in 2024.

Berkshire Hathaway outperformed the market in 2024, up about 26% at the time of writing. Strong operating performance and investment management led to a much better performance than the average value stock. About 60% of Berkshire’s value is tied to its cash and stock, while the other 40% is tied to its wholly-owned businesses, including its insurance and railroad operations.

With a current valuation of more than 1.6 times book value, the stock looks expensive. But with a balance sheet liquidated for the first time in a long time, it might be worth assessing the premium because those assets could generate significantly better returns in the future.

3. Waste management (15%)

Waste management (Wm 0.45%) is the largest waste hauler in the US. Not exactly the high-tech operation you might associate with Bill Gates. It is, however, the kind of boring business you’d associate with Warren Buffett.

The Gates Foundation Trust owns more than 35 million shares of Waste Management worth about $7.3 billion at the time of writing. The stock performed well in 2024, but took a step back after second-quarter numbers disappointed investors. The long-term outlook for the business remains strong, and the short-term doesn’t look too bad either. Finally, management raised its full-year guidance for EBITDA and free cash flow with its earnings results.

Waste Management benefits from its scale. It owns more landfills than its competitors and operates high-density routes (meaning it can serve more businesses and households more efficiently). That position also gives it pricing power and free cash flow to grow through the acquisition. The most recent acquisition agreement with Stericycle will close in the fourth quarter.

The stock is currently trading at an EV-EBITDA ratio of less than 17. This is a comparable price to its closest competitors. But with its market-leading size and ability to acquire smaller companies and potentially add value and leverage, it should be able to outperform at this price.