In May, the Bill and Melinda Gates Foundation Trust filed its 13F with the SEC for the first quarter of 2013, disclosing many of its long equity positions as of the end of March including Exxon Mobil Corporation (NYSE:XOM). At Insider Monkey, we track 13Fs from hundreds of hedge funds and other notable investors, using the included information to help us develop investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year).
We can also screen individual filings for stocks satisfying a number of criteria; while the trust’s filing is quite old, it is a long-term investors which tends to make little change to its positions over the course of a quarter. Here are four stocks which the trust owned at least $300 million of at the end of Q1 and which have both trailing and forward earnings multiples of 15 or lower (or see the full list of the trust’s stock picks).
The trust, which is managed by Michael Larson and his team, reported owning more than 10 million shares of Caterpillar Inc. (NYSE:CAT). While in terms of trailing earnings Caterpillar does appear cheap at a P/E multiple of 11, concerns have recently been growing regarding the company’s exposure to capital expenditures by the global mining and commodities industry. With Chinese growth appearing to slow, famed short seller Jim Chanos recently argued at the Delivering Alpha conference, the era of growth in commodity demand may be ending which would- according to Chanos- lead to a steep fall in demand for Caterpillar’s mining equipment. The company recently reported a 16% decline in revenue in the second quarter of 2013 versus a year earlier, with the mining equipment segment leading the decline. Consolidated operating profits fell by over 40%. As a result, we are highly skeptical that Caterpillar is in fact a value stock and quite concerned that earnings may in fact decline sharply as the mining industry adjusts.