What has billionaire and co-founder of Microsoft Bill Gates been buying lately? He, along with is his wife Melinda Gates, run a foundation called The Gates Foundation, which is centered around charitable works. The foundation controls some $37 billion, and is overseen by Michael Larson. Larson is the Chief Investment Officer for Cascade Investment (see its stock purchases here), which is the the investment vehicle for The Gates Foundation, and manages the Gates’ personal fortune. The foundation, much like fellow billionaire Warren Buffett, likes to focus on high quality, large-cap stocks, and so it is the perfect place to look to find top notch stock picks. Let’s see what the foundation was investing in during the fourth quarter of 2012.
Gates Foundation is cutting its stake in…
Siemens is a leader in many of its segments, which includes industrial automation, power generation and medical equipment. The above-mentioned expected growth should in part be driven by an increased spending in emerging markets, as these countries look to build up their infrastructure. Healthcare is one of the rapidly growing segments for Siemens, which makes up 17% of revenues, and includes products such as hearing instruments, diagnostic imaging systems, and therapy equipment.
Siemens also has a 50-50 joint venture with Nokia to merge its Middle East and Africa businesses together. This will help the two, together, provide increased quality services. A couple of other billionaire investors are also encouraged by Siemens; Ken Fisher of Fisher Asset Management and Jim Simons of Renaissance Technologies are two of the company’s top owners (check out Simons’ newest picks).
The Gates Foundation boosted stakes in…
The Coca-Cola Company (NYSE:KO) is the Gates Foundation’s second largest holding after a 45% increase in shares. The beverage company now makes up 7.3% of its portfolio. The beverage business pays a 2.9% dividend yield and has upped its dividend rate for fifty consecutive years.
Coke owns fifteen brands that generate over $1 billion in revenue and has seen some of its best growth in emerging markets, namely India, which saw double-digit sales growth last year. Another key emerging market for the company includes China; The Coca-Cola Company (NYSE:KO) plans to invest $4 billion in China over the next three years, which will help transition from 43% of its revenues derived from developed markets to only 33% by 2020.
Gates upped his stake in The Procter & Gamble Company (NYSE:PG) by 1,200% last quarter. The consumer products company has strong brand recognition, and its “fifty top brands” make up over 90% of revenues. Key initiatives for the company includes expanding beyond developed markets and cutting costs. Sales in developed markets have grown at 12% annually over the last 12 years, and P&G hopes it can leverage the same growth in emerging markets. Meanwhile, cost cutting plans include $10 billion in cost reductions by the end of fiscal 2016, as well as reducing its manufacturing platforms from 500 in 2009 to 150 by 2014, saving nearly $500 million alone.
Fellow billionaire Warren Buffett is also a fan of The Procter & Gamble Company. Buffett has the consumer products company as his fifth largest holding. After concerns voiced by billionaire Bill Ackman relating to P&G’s management (read more here), management looks to be taking some steps to turn the company around. P&G still remains cheaper than major peer Colgate Palmolive, trading at 17.5x earnings and 13x cash flow, versus Colgate Palmolive’s 21x and 18x, respectively. Let’s not forget P&G’s dividend; the company has increased its dividend for fifty-six consecutive years.
Don’t be fooled.
The moves made by Gates signal a big move toward consumer products, including Coca-Cola and Procter & Gamble. I think he has taken some cues from Buffett with respect to Coca-Cola and Procter & Gamble, both staple investments of Berkshire. Both companies, Coca-Cola and P&G, also pay dividend yields of 2.9%, and both are low volatile stocks, with three-year betas of less than 0.4.
Meanwhile, the competition in the video business is seeing pressures from telecoms, and as a result Comcast will still see pressure over the interim. Competitive pressures for Costco also make the stock unappealing in the current investing environment. Siemens is a growth story that is an interesting pick for Gates, being a lesser known name and higher growth “tech” stock, but still a solid opportunity.
The article Billionaire Bill Gates’ Big Moves originally appeared on Fool.com and is written by Marshall Hargrave.
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