Bill Gates’ Latest Stock Portfolio: Top 5 Picks

4. Caterpillar Inc. (NYSE:CAT)

Bill & Melinda Gates Foundation Trust’s Stake Value: $1.6 billion

Percentage of Bill & Melinda Gates Foundation Trust’s Portfolio: 8%

Number of Hedge Fund Holders: 54

Caterpillar Inc. (NYSE:CAT) is the world’s largest manufacturer of construction and mining equipment. Apart from heavy machinery, it also provides financial and insurance products around the world. The Fortune 100 company is based in Illinois. 

On May 20, Tigress Financial analyst Ivan Feinseth raised his price target on Caterpillar to $282, up from $278 and kept a Buy rating on the shares. The analyst observed in his research note to investors that Caterpillar Inc. (CAT), which just announced a new $15 billion share buyback plan at its analyst day, continues to experience strong end-market demand and is well-positioned to benefit from ongoing capital equipment spending.

On June 8, Caterpillar’s board decided to raise the quarterly cash dividend by 8%, to $1.20 per share of common stock, payable August 19, 2022, to stock owners of record at the close of business on July 20, 2022. Caterpillar Inc. (NYSE:CAT) has an impressive track record of growing its dividend payouts consecutively for 29 years. It currently maintains a dividend payout ratio of a sustainable 37%. 

In their Q2, 2021 investor letter, Oakmark Funds had the following to say about Caterpillar Inc. (NYSE:CAT):

“Having followed the company closely for north of a decade, Caterpillar Inc. (NYSE:CAT) is a name we know well. For much of its history, the operating efficiency of the company left much to be desired, but its underlying competitive position was rarely in doubt. A series of actions over the past decade (e.g., LEAN implementation, improved service mix, optimized manufacturing footprint) helped to narrow the gap between Caterpillar’s potential and its realized results, driving material margin expansion and strong share price performance. In our view, the company remains among the highest quality industrials in the market, but its underlying business is cyclical, which can translate to large swings in both performance and investor sentiment over short time periods. Our ability to focus on the long-term, sustainable earnings power of a business (rather than getting distracted by near-term fluctuations) is our most significant edge when investing in cyclical businesses. Due to the inherent volatility in Caterpillar’s end markets and operating performance, we suspect we’ll have a future opportunity to own this high-quality business at a more attractive price once the cycle turns and today’s enthusiasm wears off.”