The Bill and Melinda Gates Foundation Trust, founded by Bill Gates (Trades, Portfolio) and his wife Melinda in 2000, has revealed its portfolio for the fourth quarter of 2020. Top trades include reductions in the trust's holdings of Berkshire Hathaway Inc. (BRK.B, Financial), Apple Inc. (AAPL, Financial) and Amazon.com Inc. (AMZN, Financial) as well as selling out of its Alibaba Group Holding Ltd. (BABA, Financial) position. The one positive change for the quarter came from an addition to the Schrodinger Inc. (SDGR, Financial) holding.
The Bill and Melinda Gates Foundation is the largest private foundation in the world. Six years after it was established, the group's trustees created a two-entity structure: the Foundation, which distributes money to grantees, and the Foundation Trust, which manages the group's endowment. The investments of the Foundation Trust are managed by an outside team of portfolio managers. The goal of the foundation is to distribute donations and income from investments in the form of grants to encourage and fund philanthropic business activity.
Portfolio overview
At the end of the quarter, the portfolio contained 21 stocks, with no new holdings. It was valued at $22.34 billion and has seen a turnover rate of 1%. Top holdings at the end of the quarter were Berkshire Hathaway, Waste Management Inc. (WM, Financial), Caterpillar Inc. (CAT, Financial), Canadian National Railway Co. (CNI, Financial) and Walmart Inc. (WMT, Financial).
By weight, the top three sectors represented are financial services (43.71%), industrials (34.30%) and consumer defensive (8.77%).
Berkshire Hathaway
The fourth quarter saw managers pull back the Berkshire Hathaway (BRK.B, Financial) holding by 10.61% with the sale of 5 million shares. During the quarter, the shares traded at an average price of $220.33. Overall, the sale had an impact of -4.82% on the portfolio and GuruFocus estimates the total gain of the holding at 8.71%.
Berkshire Hathaway is a holding company with a wide array of subsidiaries engaged in diverse activities. The firm's core business segment is insurance, run primarily through Geico, Berkshire Hathaway Reinsurance Group and Berkshire Hathaway Primary Group. The conglomerate is unique in that it is run on a completely decentralized basis.
On Feb. 26, the stock was trading at $241.96 per share with a market cap of $570.20 billion. According to the GF Value Line, the stock is trading at fair value.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 3 out of 10. There is currently one severe warning sign issued for assets growing faster than revenue. The company's cash-to-debt ratio of 0.25 ranks it lower than than 88.14% of the insurance industry.
Alibaba
Managers of the trust cut the Alibaba (BABA, Financial) holding after only a year. The 552,383 shares were sold at an average price of $277.43 during the quarter. GuruFocus estimates the total gain of the holding at 32.60% and the sale had an impact of -0.74% on the equity portfolio.
Alibaba is the world's largest online and mobile commerce company, measured by GMV ( 5.7 trillion yuan ($846 billion) for the fiscal year ended March 2019). It operates China's most-visited online marketplaces, including Taobao and Tmall. Alibaba's China marketplaces accounted for 68% of revenue in fiscal 2019, with Taobao generating revenue through advertising and other merchant data services and Tmall deriving revenue from commission fees. Additional revenue sources include international retail and wholesale marketplaces (7%), cloud computing (7%), digital media and entertainment platforms (6%), Cainiao logistics services (4%) and innovation initiatives/other (1%). Mobile GMV accounted for roughly 85% of consolidated GMV in fiscal 2019.
As of Feb. 26, the stock was trading at $237.76 per share with a market cap of $644.92 billion. The shares are trading at a modestly undervalued rating according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 7 out of 10 and a profitability rank of 8 out of 10. There are currently two severe warning signs issued for declining gross and operating margins. Despite the severe warning sign, the company's operating margin of 16.45% currently ranks them better than 93.03% of competitors.
Schrodinger
A boost to the trust's Schrodinger (SDGR, Financial) holding represented the one positive impact on the portfolio for the quarter. Managers purchased an additional 2 million shares to boost the holding by 40.15%. During the quarter, the shares traded at an average price of $63.05. Overall, the purchase had a 0.71% impact on the portfolio and GuruFocus estimates the total gain of the holding at 118.97%.
Schrodinger is a health care-based software company. Its operating segments are Software and Drug discovery. Through the Software segment, the company is focused on selling software to transform drug discovery across the life sciences industry and customers in materials science industries. In the Drug discovery segment, it is engaged in generating revenue from a portfolio of preclinical and clinical programs, internally and through collaborations. Schrodinger generates revenue from the sales of software solutions and from research funding and milestone payments from its drug discovery collaborations.
The stock was trading at $102.48 per share with a market cap of $7.12 billion on Feb. 26. There is not currently enough data available to display the GF Value Line or the Peter Lynch chart.
GuruFocus gives the company a financial strength rating of 7 out of 10. There is currently once severe warning sign issued for a Sloan ratio indicating poor quality of earnings. So far, the company's weighted average cost of capital far exceeds the return on invested capital.
Apple
Managers of the trust slashed the Apple (AAPL, Financial) holding by 50% with the sale of one million shares. During the fourth quarter, the shares traded at an average price of $120.34 per share. The holding has gained an estimated 65.45% and the sale had an impact of -0.53% on the portfolio.
Apple designs a wide variety of consumer electronic devices, including smartphones, tablets, PCs, smartwatches and TV boxes, among others. The iPhone makes up the majority of Apple's total revenue. In addition, the company offers its customers a variety of services such as Apple Music, iCloud, Apple Care, Apple TV+, Apple Arcade, Apple Card, and Apple Pay, among others. Apple's products run internally developed software and semiconductors, and it is well known for its integration of hardware, software and services. Apple's products are distributed online as well as through company-owned stores and third-party retailers. The company generates roughly 40% of its revenue from the Americas, with the remainder earned internationally.
On Feb. 26, the stock was trading at $121.26 per share with a market cap of $2.04 trillion. According to the GF Value Line, the stock is trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 1 out of 10. There is currently one severe warning sign issued for a declining operating margin. The company's free cash flow has easily supported dividend payouts over the last several years.
Amazon
The trust's Amazon (AMZN, Financial) holding was also cut by 50% during the quarter with the sale of 30,230 shares. The shares traded at an average price of $3,191.09 per share during the fourth quarter. Overall, the sale had an impact of -0.43% and GuruFocus estimates the total gain of the holding at 62.09%.
Amazon is a leading online retailer and one of the highest-grossing e-commerce aggregators, with $386 billion in net sales and approximately $482 billion in estimated physical and digital online gross merchandise volume, or GMV, in 2020. Retail related revenue represented approximately 83% of total, followed by Amazon Web Services' cloud computing, storage, database and other offerings (12%) and advertising services and co-branded credit cards (6%). International segments constituted 27% of Amazon's non-AWS sales in 20202, led by Germany, the United Kingdom and Japan.
As of Feb. 26, the stock was trading at $3,092.93 per share with a market cap of $1.56 trillion. The GF Value line shows the stock trading at a fair value rating.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 4 out of 10. There is currently one severe warning sign issued for assets growing faster than revenue. Amazon's revenue and net income have increased constantly since 2015.
Disclosure: Author owns no stocks mentioned.
Read more here:
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