Inside Bill Gates' $17B Defensive Stock Portfolio. (Mid 2020)

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In this video, we're going to be running through the top 10 stock positions that Bill Gates holds in his portfolio. So, his portfolio is worth about 17 billion dollars. Technically, it's not his portfolio; it is the portfolio for the Bill and Melinda Gates Foundation.

And it's actually not even managed by him either; it's managed by a guy called Michael Larson, who is the chief investment officer for the Gates Foundation. I find this to be a really interesting portfolio because, as we'll see, it's actually really quite diversified, and you can tell it's pretty defensive. You can definitely tell that the strategy here is first and foremost to preserve wealth and then try and get just a modest return on top of that, essentially preserving the wealth that Bill made through his Microsoft days.

That's reflected by the fact that you're going to be seeing stocks in here that are going to be performers no matter what's going on in the world, no matter what the economy is doing. Basically, no matter the situation, these companies will still be bringing in revenues. So, it’s definitely designed to preserve wealth plus a little bit extra.

That said, the biggest position that Bill currently holds in his foundation's portfolio is in Berkshire Hathaway. This isn't completely surprising because, of course, Bill is on the board of directors of Berkshire Hathaway and can quite often be seen going mattress shopping with Warren Buffett himself. But having Berkshire Hathaway as such a large percentage of the portfolio definitely ties in with the idea of being quite diversified and quite defensive with the portfolio.

Because when you buy into a company like Berkshire Hathaway, yes, they have a lot of wholly owned businesses themselves, but they also have minor positions in lots of other public companies. So, you are buying a lot of businesses just with one share in Berkshire Hathaway.

As I said, they have wholly owned businesses like, for instance, Geico, which provides millions of Americans with insurance products. They've got BNSF Railway, which is an enormous railway network across America. Then, they've got Berkshire Hathaway Energy, which is a huge energy producer in the United States.

Going on from that, they've also got smaller stakes in companies like Coca-Cola, Apple, and American Express. The U.S. banks… this chart is actually out of date with the airlines here. No, he no longer holds any airline stocks, but you can see generally it’s very well diversified, and it's including some of those key companies that are super important to the economy.

How society works, just generally, you get big brands in there like Apple, you get a massive railway network like BNSF Railway, you get Geico, a huge insurance provider. People are always going to need insurance no matter what's going on. So, just by holding Berkshire Hathaway, you actually get great diversification into lots of different sectors or industries that are going to still perform pretty well regardless of the economic climates.

A lot of people might say it's quite risky to have 47 percent of your portfolio tied up in one business, and generally I would agree. Like if you had 47 percent of your portfolio just in, say, a company like Facebook, where its entire business is just making money through advertising, yeah, then that's a little bit more risky. But with a company like Berkshire Hathaway, because they are so diversified across different sectors just within their own company, through their wholly owned businesses or just their stock portfolio, it's not the most risky stock to have occupying like 47 percent of your portfolio.

Alright, moving on to the second stock in this portfolio: it is Waste Management. So, this is like a perfect kind of Peter Lynch stock. Peter Lynch, he hates the ones that catch the headlines; he loves the stocks that no one wants to talk about, the garbage companies or the waste companies, and this stock would be right up his alley.

So, no prizes for guessing: obviously, Waste Management is all about collecting waste and recyclables and processing them. So, this again is another example of how this portfolio is quite defensive. Like, no matter what's happening in the economic environment, people are still going to need their waste collected, right?

Even though people might be pulling back their spending on luxury cars or designer clothing, at the end of the day, they still eat food. Food comes in containers; containers go into the waste, and that waste needs to be dealt with. So, this is one of those ones where all year round, 24/7, it’s just going to be a consistent performer.

In fact, here is the revenue chart for Waste Management over the past 12 years, and I've done 12 years specifically so that it includes the GFC. As you can see, there is not a whole lot of variation in their revenue. It is just a slow but steady grower over time, and you can see the effect that the GFC had: only a very minor blip for this company.

So again, definitely a defensive company. Eighteen point six million shares total; that makes up a 1.7 billion dollar stake, and it makes up 10% of the Bill and Melinda Gates Foundation portfolio.

Now moving on into the third largest position in the Gates portfolio, we are looking at the Canadian National Railway companies. So, why not? By owning Berkshire Hathaway, you're already owning BNSF, so why not add another massive railway company to your portfolio with Canadian National Railway?

If you have a look at the chart here, you can see that the gray color here is the BNSF track, which, as I said, is owned by Berkshire. And as you can see, it doesn't really come up into Canada. So, why not add all this red into your portfolio as well and add another 20,000 miles of railroad track across Canada and the United States?

There's no doubt that, obviously, rail plays an integral part of freight and thus the economy of a lot of countries around the world. So, it's not surprising that when we're thinking about kind of more defensive stocks, stocks that kind of do well no matter what, preserve wealth, then rail is just a smart way to go when it comes to getting freight around the world.

It's either going to be rail when it's on land or it's going to be cargo ships when it's on the sea. So, maybe high-tech solutions might overtake rail one day, but obviously that technology is still a fair way away.

So, why not add those amazing network effects that these massive railroad companies have and slot them into a defensive portfolio? Overall, Gates holds 17 million shares, and it's worth 1.3 billion dollars; it makes up 7.6 percent of his portfolio.

Now next up on the list, the fourth biggest position in the Gates portfolio is Walmart. So, as you probably know, Walmart has an absolutely monster chain of stores covering all the states in the United States. They've got over 5,300 stores in the United States and 6,146 stores internationally.

So, as most people know, Walmart has massive stores that pretty much offer everything under the sun. But if you're unfamiliar with their long list of products, they include grocery items, including meat, produce, natural and organic, deli and bakery, dairy, frozen foods, alcoholic and non-alcoholic, housewares and small appliances, bedding, home decor, toys, fabrics, crafts, and seasonal merchandise.

Oh, again, this is just a monster company. They have so many stores; they are an integral part of the U.S. economy. Obviously, lots of shoppers, lots of stores, and yes, this is also fairly defensive because you can argue that, of course, if we were to hit some sort of major recession, then maybe people would stop spending so much on, you know, home decor or home furnishings.

But they're still going to show up, and they're going to buy things like groceries. So again, a pretty defensive stock! Overall, the foundation holds 11.6 million shares; that's a 1.3 billion dollar position, and it makes up 7.6 percent of the portfolio.

And keeping the ball rolling, the next stock that we've got to talk about is the fifth-largest position in the Gates Foundation portfolio, and that is Caterpillar. So Caterpillar is the world's largest manufacturer of machinery, and from my very limited understanding of this industry, it actually has a pretty decent brand moat over in the United States.

And this is the only stock that doesn't really fit with that whole defensive kind of all-weather portfolio as we've been talking about. And that's quite simply because, in periods of really poor economic growth, such as seeing recessions or something like that, then new construction infrastructure just falls off a cliff, and it just kind of grinds to a halt for the length of time that the recession goes on for.

Then, as we come out of the recession, that slowly picks back up. So, you can definitely bet this is quite a kind of cyclical business, and the demand for new construction machinery would definitely dip if new construction dipped as well in times of economic recession.

But overall, those times are few and far between, and I would pretty comfortably bet on the idea that we will see an increase in construction over the next ten years as opposed to a decrease. So as a long-term stock, it's probably not the worst idea for this portfolio.

Overall, the foundation holds 11.2 million shares in Caterpillar; that's a stake of 1.3 billion, and it holds 7.5 percent of the portfolio. Anyway, moving on into the sixth-largest position in the portfolio, we look at Crown Castle. Now this company owns 40,000 cell towers, traditional cell towers.

They also own over 80,000 miles of fiber routes, and interestingly, they're also in this small cell node game, which is going to prove interesting over the next few years, of course, with the rollout of the 5G network. They also own over 70,000 small cell nodes, and that number is only increasing year-over-year.

Again, this is tapping into an industry that is only going to see growth for the next couple of decades. As we continue to use these things much, much more because we could essentially be in, I reckon, the deepest, darkest depression we have ever seen, and people will still show up each month and still contribute and buy their phone plans.

Now continue to need that cellular connectivity, so definitely another one which is pretty defensive. Should see strong growth over decades and decades just because it falls perfectly in the right industry. So, with that said, overall, Bill has 5.3 million shares; it's worth 770 million, and it makes up 4.4 percent of the portfolio.

Now, next up we have got a company called Ecolab. This was a bit of a weird one to understand; essentially they are all about water, but they're more of a provider of water technologies. So they provide water hygiene and infection prevention solutions and services to the food, healthcare, hospitality, and industrial markets.

To me, it seems like a lot of consulting, but they also seem to provide products and services to these industries as well. But it's a very wide-ranging list of what they can do, and it really depends on what industry you're in and what your needs are as a business.

So, it's quite hard to understand. For instance, if you're looking at the food and beverage industry, then they provide things like bottle washing solutions or cleaning and sanitizing programs. But if you're in heavy industry or mining, they provide boiler and cooling water treatment, mine water treatment analytics, and so on.

It seems like this company does an array of different things, but it all relates back to water, and overall Bill must see something in it because it occupies 3.9 percent of the Foundation's portfolio.

Now moving on in the eighth and ninth largest positions in the Gates Foundation portfolio: it’s UPS and FedEx. They're very much linked because they are both package delivery services. Obviously, these companies are a huge part of our modern-day society and will continue to be a very important part, especially in the age of e-commerce, where, you know, home delivery, the delivery of parcels, packages, and whatever is just skyrocketing.

The interesting thing here is that the big positions here are in FedEx and in UPS, but Amazon is going to be the big player—well, it's almost already the big player—that's going to come and overtake them both. However, before you say that it was foolish of them to include these two stocks in the portfolio, they also do have Amazon in there as well.

So, I've got this whole industry covered fairly well, especially for the United States. However, Amazon doesn't make the top ten list; it comes in at number 13. So overall, UPS makes up 2.44% of the Foundation's portfolio, and FedEx sits at 2.11%. Amazon, interestingly, comes in at 0.68% of the portfolio.

Anyway, coming in last but not least in the 10th position, the 10th largest position in the Bill and Melinda Gates Foundation's portfolio is a company called Schrödinger, Inc. And this is a really interesting company. What was interesting for me to look at, anyway, this again doesn't really fit with the whole idea that it's a conservative portfolio, and it's not very speculative.

This company is a little bit more, you know, technology-based, a little bit more speculative. Essentially, what they do is they've developed a computer platform that helps scientists and researchers actually construct compounds on a computer. So, they've built this awesome computer program, and then they look to sell this program to pharmaceutical companies, biotechnology companies, chemical companies, and also electronics companies so that they can then use the program to innovate and work on their material design or that different compounds used in different products.

So when I had a quick look at this company, they actually looked really cool. But as I was saying before, it doesn't really fit with this whole idea of really defensive, you know, all-weather kind of stocks like a lot of the rest of the portfolio. However, that's probably why it comes in at number 10; it only occupies 1.73% of the portfolio.

Anyway, that is it! They are the top ten positions in the Bill and Melinda Gates Foundation's portfolio, and it's pretty interesting that the top 10 positions equate to 94.69% of the portfolio in total. So, there's really not too much of significance after these top ten stocks.

Overall, it's very interesting to look into— I definitely like looking into these notable names, these notable figures, and have a look at their stock portfolios. I find it super interesting, and you can definitely tell the number one priority with this portfolio is preservation of wealth. Preservation of wealth comes first, and then if you can make a modest return on top of that, then that's what they're trying to achieve.

So anyway, guys, I'd love to hear what you guys think of this portfolio. Leave your opinions down in the comments section below. I'd love to hear from you guys! Isn't it interesting that Bill Gates, he doesn't actually own any Microsoft stock? I found that pretty interesting, and I also found interesting that 47% is just in Berkshire Hathaway. I would have thought it would be a little bit less than that, but there you go. He obviously has great faith in Warren Buffett and Charlie Munger.

Anyway, guys, that is it from me. Fortunately, leave a like in the video if you did enjoy it, and subscribe to the channel if you haven't done so already. Make sure you check out Profitable as well; links are down in the description below if you want a step-by-step guide to investing—either passive investing or Warren Buffett style active investing. Both strategies have courses on Profitable, so check them out if you haven't done so already.

But that is it from me for today. Thanks for watching! I'll see you guys in the next video. [Music]