The Bill and Melinda Gates Foundation Trust is a long term investor whose capital is used to fund ongoing foundation activities and invested to sustain the foundation for a long period of time. It is one of the investors we track in our database of quarterly 13F filings, which we use to help us develop investment strategies (for example, we have found that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year). Even though its most recent 13F filing discloses many of its long equity positions from the end of March, the trust actually hadn’t changed most of these positions during the first quarter of 2013 and so we would assume that it still owns quite a bit of what had been its largest holdings at that time. Read on for our quick take on its top five picks or check out the full list of stocks the trust reported owning.
The trust, which is managed by Michael Larson, reported a position of almost 81 million Class B shares of Berkshire Hathaway Inc. (NYSE:BRK.B). Gates and Berkshire Hathaway Inc. (NYSE:BRK.B) head Warren Buffett have bonded on a number of topics and issues, and apparently the trust is a strong believer that both Buffett and his hand-picked successors will prove able to identify attractive investment opportunities over the long term even given their massive size (find Buffett's favorite stocks). In addition to the succession at Berkshire Hathaway Inc. (NYSE:BRK.B), however, investors may also be concerned with the premium P/B ratio of 1.5.
Larson and his team didn’t just own Berkshire Hathaway Inc. (NYSE:BRK.B), they’ve also copied one of Buffett’s long term favorite stock picks, The Coca-Cola Company (NYSE:KO), with about 34 million shares in their portfolio. While Coca-Cola is a somewhat popular defensive stock, with a beta of 0.3 and a dividend yield of 2.7%, its business has been struggling going by recent reports. At a valuation of 21 times trailing earnings, markets are pricing in quite a bit of future earnings growth and so given this recent financial performance it doesn’t seem like a good buy right now.
Latin American Coca-Cola bottler and distributor Coca-Cola FEMSA, S.A.B. de C.V. (ADR) (NYSE:KOF) was another of the foundation’s top picks with the filing disclosing ownership of 6.2 million shares. Coca-Cola Femsa is even less sensitive to the broader economy than its related company, with a beta of only 0.1. However, it too carries something of a premium valuation, with trailing and forward earnings multiples of 28 and 22 respectively. As with Coca-Cola itself, recent performance has not been in line with market implied expectations with earnings declining in its last quarterly report compared to Q1 2012.