In this article, we will be taking a look at how to preserve your wealth by observing Bill Gates’ Portfolio. To delve deeper into these insights, you can directly review the 5 Sectors to Invest In to Preserve Your Wealth According to Bill Gates’ Portfolio.
Focusing on simple business models that generate dependable cash flows is a strategy that has allowed Bill Gates to amass and preserve wealth over the years. The Harvard University dropout has become a force to reckon with in the investment world despite being known for his escapades with Microsoft.
Microsoft Corporation (NASDAQ:MSFT), the company Gates helped found, sits at the heart of the computing revolution and is a vital source of the billionaire investor and philanthropist’s wealth. Founded in 1976, Microsoft would find itself in stiff competition against Apple in the initial years in the race to take the personal computing crown.
Facing stiff competition from Steve Jobs, who sought to control the entire user experience through the Macintosh operating system, Gates focused on developing an operating system that would be used on any computer.
His efforts and focus would pay years later as Microsoft ended up becoming the world’s largest computer operating system in the world.
Microsoft’s control of the computer operating system has made it a trillion-dollar company. Likewise, the company accounts for the biggest share of Mr. Gates’ wealth as he still holds about 1.3% of stakes in the software giant. Microsoft’s growth is a dream come true for Bill Gates, who has always insisted on focusing on what you are obsessed with the most.
In a 2016 television interview with Charlie Rose, Gates remarked, “The thing you do obsessively between age 13 and 18, that’s the thing you have the most chance of being world-class at.”
Gates has always been obsessed with coding, forcing him to drop out of Harvard and form what will become a force to reckon with in the computing world.
After nearly four decades, Gates would leave the company he helped found and charter another path as an investor and philanthropist. With a net worth of more than $110 billion, Gates is nowadays more interested in giving his money away rather than acquiring more. Along with his now ex-wife, Melinda Gates, he has donated more than $30 billion in stock from Microsoft through the Bill & Melinda Gates Foundation.
Despite his philanthropy work, Gates is also a big investor in betting on various stocks, a drive influenced by his solid relationship with billionaire investor Warren Buffett. When asked what he was obsessed with as a teenager by CNBC, Gates is quoted as saying, “Well, I was pretty interested in investments,” This might explain how he turned out to be one of the biggest and most successful investors despite being a tech guru.
His foundation holds vast portfolio investments in various stocks and startups. Buffett is believed to have a strong influence on Gates’ investment philosophy. A majority of Mr. Gates’ financial assets are held by Cascade Investments L.L.C., an institute he founded that accounts for the biggest share of his holdings. The investment portfolio is well diversified, with holdings in various industries ranging from tech to industrial, real estate, and consumer discretionary.
The diversified nature of Mr. Gates’ holdings is depicted by billions worth of holdings in Microsoft, giving him tremendous exposure in the tech industry. He also owns holdings in Four Seasons hotels in Mexico and stakes in branded Entertainment Network for exposure in the advertising sector.
The billionaire investor has also sought to preserve his real estate wealth, having invested a significant amount of money into buying real estate assets. The investor is also big in transportation with Canadian National Railway Corporation investments. He is also the chair of Nuclear Reactor Designs Company, affirming his interest in the energy sector. Gates also funds initiatives in clean energy education and healthcare.
Gates’ wealth is spread out over several sectors as part of his diversification strategy. The diversification strategy focuses on capital preservation rather than rapid appreciation. The investment strategy has seen him invest nearly 60% of his wealth in stocks in various industries, the highest of any family office portfolio in North America.
Our Methodology
Bill Gates made much of his wealth through his close ties with Microsoft Corporation (NASDAQ:MSFT). However, after leaving the company, he has ventured into the investment world in the race to preserve and grow his wealth. Diversification has turned out to be the billionaire investor’s important strategy in the race to preserve wealth. We have compiled some of the biggest segments the billionaire investors has turned to safeguard his wealth. The sectors are arranged according to their weighting in the billionaire and philanthropic investor’s portfolio during the second quarter of 2023.
How to Preserve Your Wealth According to Bill Gates’ Portfolio
9. Communication Services
Sector Weighting in Q2 2023: 0.26%
Communication Service is a market segment made up of companies that provide communication services using fiber line networks or those that leverage wireless networks. The segment also includes companies that provide internet services such as access navigational and internet-related software and services.
Some of the best communication services companies include those that have been around for years and pay attractive dividends. It also includes early-stage startups that are years away from showing profits. Nevertheless, companies are often susceptible to deteriorating economic conditions.
During economic contractions, spending on communications or advertising often takes a hit, affecting the company’s performance.
Madison Square Garden Sports Corp. (NYSE:MSGS) is a diversified sports company that owns and operates several professional sports franchises, such as the New York Knicks (N.B.A.), the New York Rangers (N.H.L.), and the New York Liberty (WNBA). It also owns and operates sports venues, such as Madison Square Garden and the Hulu Theater, as well as media networks, such as M.S.G. Network and M.S.G. Plus.
Gates has a stake in Madison Square Garden Sports Corp. (NYSE:MSGS) through his Bill & Melinda Gates Foundation Trust. As of June 30, 2023, the trust held 592,410 shares of MSGS, valued at $111.40 million. This represents 0.3% of the trust’s portfolio. Gates has been investing in MSGS since 2021 when he bought 278,147 shares.
He apparently sees MSGS as a long-term investment that can benefit from the popularity and growth of sports entertainment and media. MSGS does not pay a dividend to its shareholders, as it reinvests its earnings into its business operations and growth initiatives. The company’s stock price has increased by 19% over the past 12 months, outperforming the S&P 500 index by 5.11%.
8. Real estate
Sector Weighting in Q2 2023: 0.28%
The real estate sector comprises companies that own and operate commercial and residential properties. It also includes real estate investment trusts that operate properties and collect rent. Investors highly seek the segment as it provides stable income and tax advantages depending on the investment type. REIT stocks are some of the best owing to their generous yields as they distribute up to 90% of their net income to shareholders.
Real Estate has always been one of the best options for Bill Gates in preserving wealth. The billionaire invests in sprawling estates, including his Seattle home, an ocean lodge boasting over 66,000 square feet. He also owns properties in Wellington, Florida, snapping a four-bedroom mansion and horse ranch for $8.7 million. He also bought adjacent parcels for a total of $35.87 million.
Bill Gates owns a significant stake in Crown Castle International Corp. (NYSE:CCI), a real estate investment trust that owns and operates communication infrastructure in the U.S. Crown Castle is one of the largest providers of cell towers, fiber networks, and small cell nodes that are essential for the deployment of 5G technology.
As of the second quarter of 2023, the Bill and Melinda Gates Foundation Trust held over 1.42 million shares in Crown Castle, valued at $161.80 million. This represents 0.38% of the trust’s portfolio.
Gates has been investing in Crown Castle since 2014 when he bought 5.3 million shares for about $375 million. He has maintained his position since then despite the fluctuations in the stock price and the dividend yield. One of the companies that Bill Gates invests in to protect and grow his wealth is Crown Castle, a leader in communication infrastructure in the U.S. Crown Castle owns and rents out over 40,000 cell towers and 85,000 miles of fiber optic cables that support small cells and fiber solutions. The company boasts a juicy 5.5% forward yield, which affirms why it is in the portfolio.
7. Consumer Cyclical
Sector Weighting in Q2 2023: 0.46%
Consumer Cyclical is a market segment dominated by companies that produce non-essential commodities. Also known as the consumer discretionary segment, it encompasses businesses and companies that sell dispensable goods and services like designer clothing, automobiles, eateries, and entertainment. Such companies are billed as cyclical as their performance highly depends on the economy’s health or prevailing economic situation.
Consumer discretionary plays tend to outperform whenever the economy is booming with increased consumer spending. They also underperform during depressed economic situations. The segment has performed well over the past three years owing to increased consumer spending on solid economic conditions.
Gates has a small exposure in the consumer cyclical segment with investments in Coupang, Inc. (NYSE:CPNG), an online shopping platform in South Korea. He has also invested in Carvana Co. (NYSE:CVNA), a company that operates an e-commerce platform for buying and selling used cars. Vroom, an end-to-end e-commerce platform for buying and selling cars, is also part of the portfolio. He has also invested in On Holding AG (NYSE:ONON).
6. Healthcare
Sector Weighting in Q2 2023: 1.04%
The healthcare segment consists of businesses that offer medical care, produce medical devices or drugs, and provide medical insurance. It is one of the largest and most complex in the U.S. economy, accounting for 18% of the total gross domestic product. Spending in the segment is expected to hit record highs of $12 trillion by 2040.
Bill Gates has always been a big investor in the healthcare sector. He is on record insisting that initiatives to fight malaria, AIDS, and other diseases in poor countries will always be America’s best investment for saving lives.
In 2019, Gates reiterated that his best investment was the $10 billion invested through the Bill & Melinda Gates Foundation into organizations to increase access to vaccines and medicines for people worldwide. He invested the amounts into the Global Alliance for Vaccines and Immunization, the Global Fund to Fight Tuberculosis and Malaria, AIDS, and the Global Polio Eradication Initiative.
Currently, he is invested in Schrödinger, Inc. (NASDAQ:SDGR), a company that develops a physics-based computational platform to discover novel molecules for drug development. The company leverages artificial intelligence technology to discover novel molecules with optimal drug development profiles. Schrödinger, Inc. stock was added to the hedge fund’s portfolio during the first quarter of 2020 when Gates bought 6.98 million shares.
Another healthcare stock in Gates’ portfolio includes Danaher Corporation (NYSE: D.H.R.). His hedge fund first invested in the company in the fourth quarter of 2022. The hedge fund still holds 373,000 shares of the company, worth more than $89.52 million.
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Disclosure: None. How to Preserve Your Wealth According to Bill Gates’ Portfolio is originally published on Insider Monkey.
