Billionaire Bill Gates Has 78% of His Foundation's $34 Billion Portfolio Invested in 4 Fantastic Stocks

Bill Gates became the world's wealthiest person in the world in the 1990s as the personal computing and internet revolution took hold in America. By the end of the decade, the rise in value of Microsoft, the company he co-founded, pushed his net worth beyond $100 billion at its peak. At the turn of the century, however, Gates started to move away from the tech company to focus on philanthropy through the Gates Foundation.

Gates plans to donate 99% of his wealth to the Gates Foundation over his lifetime. The foundation maintains a trust fund that includes an equity portfolio full of wonderful stocks. But readers may be surprised to learn that most of the companies in the portfolio aren't high-flying tech stocks. In fact, over three-quarters of the portfolio is held in just four companies, primarily focused on stalwart sectors such as finance and industrials.

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1. Berkshire Hathaway (24.6% of the portfolio)

Warren Buffett donates shares of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) to the Gates Foundation every year. Despite stipulations that the foundation must spend the entire value of his donation plus 5% of the rest of its endowment, the Gates Foundation has managed to maintain Berkshire as its largest holding.

Buffett stepped down as CEO of Berkshire Hathaway at the start of the year, handing the reins over to Greg Abel. The latter has made several notable moves as CEO, including efforts to deploy significant amounts of capital in equities, such as Alphabet and Tokio Marine. He also oversaw the acquisition of chemicals business OxyChem and homebuilder Taylor Morrison.

Abel's focused on maintaining the excellent operating results of the insurance business while improving margins for the railroad business toward levels in line with industry leaders. Net earnings increased in each of Berkshire's core operating segments in the first quarter. With a price-to-book ratio around 1.46, the stock is trading at a good value right now.

2. Caterpillar (18.3%)

Caterpillar (NYSE: CAT) is the world's leading manufacturer of construction and mining equipment. The Gates Foundation has long held a position in the company, even if it's trimmed that position over the years. However, recent price appreciation for the stock has been driven by its potential to participate in the massive data center build-outs of big tech companies, pushing it to become the trust's second largest position.

To be sure, data center construction has been a driver for Caterpillar's results over the past few quarters. The company's power generation segment grew revenue by 48% year over year last quarter, driven by demand for large gensets and turbines for data centers. Meanwhile, its construction equipment continues to grow at a modest pace, up 7% year over year.

Management is highly focused on recurring services for its equipment, with plans to grow the segment to $30 billion in revenue by 2030. That could help reduce cyclicality in the business. Still, downturns are inevitable. After the stock's incredible run over the past year, it now trades at roughly 40 times earnings expectations. Despite the potential for strong margin expansion over the next few years, Caterpillar would have to produce revenue growth well above expectations to justify the current stock price.

3. WM (17.7%)

WM (NYSE: WM), previously known as Waste Management, is another longtime holding for the Gates Foundation Trust. The company holds leading positions in waste collection and disposal as well as recycling, with burgeoning businesses in medical waste solutions and renewable energy.

WM's biggest advantage in the industry stems from its ownership of landfills, which includes more than 250 locations across North America. It's built a broad network of transfer stations and hauling sites providing vertical integration, and a service it can charge other waste collectors for. Its scale also allows it to produce substantial margins for its collection and disposal businesses, as it can operate denser routes and maximize revenue per truck.

Strong operating results from its core business have allowed it to pursue ancillary operations such as medical waste disposal and renewable energy. The acquisition of Stericycle in 2024 led to the establishment of WM Healthcare Solutions. While currently a drag on operating margin, the business should see improvements over the years as it scales and fully leverages WM's disposal network.

The company's enterprise value-to-EBITDA ratio of 13 is a fair price to pay for the company despite its slow revenue growth. Steady margin expansion and a recession-proof business make it a stock worth owning over the long run for value investors.

4. Canadian National Railway (17.4%)

Canadian National Railway (NYSE: CNI) is one of the most efficient rail operators in the business. The rail business benefits from key competitive advantages, including high barriers to entry, economies of scale, and recession-resistant pricing compared with trucking and other freight-hauling modes.

Canadian National benefits from its unique tricoastal railways spanning from east to west in Canada and north to south through the United States. While tariffs have weighed on shipments of materials, including metals and lumber, the company has offset the decline in those areas with increased grain shipments and intermodal volumes.

Meanwhile, management is focused on capital efficiency, pulling back on spending plans this year. Capital expenditures are on track to meet management's goal of reducing spending by 15%, resulting in substantial free-cash-flow growth this year. Management is returning that cash to shareholders through share repurchases, with authorization to buy up to 24 million shares. It executed exactly one-quarter of that amount in the first quarter.

At an enterprise value-to-EBITDA ratio of 13.5, Canadian National trades for a discount relative to other leading railroad operators. While it's faced setbacks from tariffs, it should see revenue accelerate again and expand its operating margin in 2027 and beyond, making it a great value right now.

Adam Levy has positions in Alphabet and Microsoft. The Motley Fool has positions in and recommends Alphabet, Berkshire Hathaway, Caterpillar, and Microsoft. The Motley Fool recommends Canadian National Railway and WM. The Motley Fool has a disclosure policy.