The Bill & Melinda Gates Foundation Trust’s Top Stocks and the One It Dumped

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With endowments exceeding $44 billion at the end of 2014, the Bill & Melinda Gates Foundation Trust is the largest charitable organization in the world. Some of that money is invested by Michael Larson on behalf of the foundation, with a focus on the public equity and fixed income markets. The trust’s equity portfolio carries a market value of approximately $16.6 billion and consists of only 18 stocks, one of them accounting for 59% of the portfolio. Insider Monkey calculates a fund manager’s stock picking ability by looking at the weighted average returns of his or her long positions in companies with a market cap that exceeds $1 billion, based on the size of those positions at the beginning of each quarter. According to this metric, the Bill & Melinda Gates Foundation Trust’s qualifying stocks registered a loss of 11.8% in 2015, while Jeffrey Ubben‘s ValueAct Capital, whose equity portfolio carries a similar value, managed a positive return of 1% during the same period. In this article we’ll take a look at the changes Michael Larson has made to the Trust’s portfolio in an effort to return it to positive gains in 2016.

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There were only two changes made to the Trust’s equity portfolio during the fourth quarter with one of them being the closing of its stake in BP plc (ADR) (NYSE:BP). As of the end of the third quarter, the Trust reported ownership of 6.13 million shares of the oil giant, then valued at a little over $187 million. Like most every other oil company, BP plc (ADR) (NYSE:BP) was harshly affected by the current weakness in the oil market, having reported a loss of $2.2 billion for the fourth quarter. Revenue fell by 35% to $49.2 billion, while adjusted earnings stood at $0.06 per share. In October 2015, the U.S. Department of Justice slapped BP plc (ADR) (NYSE:BP) with a $20.8 billion fine for the 2010 Deepwater Horizon oil spill, taking the reparations “bill” for the disaster to more than $54 billion.

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The other portfolio change consists of the sale of 5.00 million shares of Berkshire Hathaway Inc. (NYSE:BRK.B), which have been regularly donated by Warren Buffett as a form of contribution to the Bill and Melinda Gates Foundation. The investment trust now holds roughly 74.4 million class B shares of Buffett’s holding company, worth $9.82 billion at the end of 2015. Being managed by Warren Buffett did not help Berkshire Hathaway Inc. (NYSE:BRK.B) avoid the recent market selloffs, with the stock having ended 2015 down by roughly 13% and contributing greatly to the Trust’s poor stock picking performance for the year. Berkshire recently completed the acquisition of Precision Castparts, a maker of aerospace and other parts, after regulators from the European Union gave it the green light. Including the company’s debt, the deal is valued at approximately $37.2 billion, the largest acquisition in the history of Berkshire Hathaway Inc. (NYSE:BRK.B). This is the latest step in Buffett’s strategy of broadening the company’s horizons and diversifying beyond the financial and insurance businesses.

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Thanks to its relatively good stock performance, Waste Management, Inc. (NYSE:WM) is now the Trust’s second-largest position. The Gates Foundation Trust continues to hold 18.60 million shares worth approximately $994 million. Waste Management, Inc. (NYSE:WM) released its fourth quarter financial figures today, providing mixed results. Revenue fell by 3.3% to $3.25 billion, below the Street’s expectations of $3.28 billion. Adjusted earnings came in at $0.71 per share, surpassing analysts’ estimates of $0.68 per share. Although Waste Management, Inc. (NYSE:WM) opened lower today, it quickly regained the lost ground and is currently trading around the $95 level, up by 4.5% year-to-date.

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