The Bill and Melinda Gates Foundation Trust, founded by Bill Gates (Trades, Portfolio) and his ex-wife Melinda in 2000, has revealed its portfolio for the first quarter of 2021. Top trades include reductions in Berkshire Hathaway Inc. (BRK.B, Financial), Walmart Inc. (WMT, Financial), FedEx Corp. (FDX, Financial) and Canadian National Railway Co. (CNI, Financial) alongside a new buy into Coupang Inc. (CPNG, Financial).
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 17 stocks, with the one new holding in Coupang. It was valued at $20.96 billion and has seen a turnover rate of 1%. Top holdings include Berkshire Hathaway, Waste Management Inc. (WM, Financial), Caterpillar Inc. (CAT, Financial), Canadian National Railway and Walmart.
The top three sectors represented are financial services (45.23%), industrials (34.70%) and consumer defensive (6.30%).
Berkshire Hathaway
The first quarter saw managers pull back the Berkshire Hathaway (BRK.B, Financial) holding for the second quarter in a row. They sold an additional 5 million shares to cut the holding by 11.88%. During the quarter, the shares traded at an average price of $242.84. Overall, the sale had a -5.19% impact on the equity portfolio and GuruFocus estimates the total gain of the holding at 9.33%.
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 May 18, the stock was trading at $282.09 per share with a market cap of $660.10 billion. According to the GF Value Line, the stock is trading at a fair value rating.
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 6 out of 10. There is currently one severe warning sign issued for the company for assets growing faster than revenue. The company's strong return on equity and assets ranks it higher than the majority of competitors in the insurance industry.
Walmart
Another top holding in the portfolio to see a cut was Walmart (WMT, Financial). Managers pulled back the holding by 34.49% with the sale of 4 million shares. Throughout the first quarter, the shares traded at an average price of $139.05. GuruFocus estimates the total gain of the holding at a strong 156.80% and the sale had an impact of -2.58% on the equity portfolio overall.
America's largest retailer by sales, Walmart operated over 11,400 stores under 54 banners at the end of fiscal 2021, selling a variety of general merchandise and grocery items. Its home market accounted for 78% of sales in fiscal 2021, with Mexico and Central America (6%) and Canada (4%) its largest external markets. In the United States, around 56% of sales come from grocery, 32% from general merchandise and 10% from health and wellness items. The company operates several e-commerce properties apart from its eponymous site, including Flipkart and shoes.com (it also owns a roughly 10% stake in Chinese online retailer JD.com). Combined, e-commerce accounted for about 12% of fiscal 2021 sales.
As of May 18, the stock was trading at $142.33 per share with a market cap of $399.99 billion. The shares are trading at a modestly overvalued rating according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 6 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 the company for a declining operating margin. Revenue has increased on a consistent basis over the last several years and net income has regained some value after tailing off.
FedEx
One of the largest cuts in a holding came from the trust's FedEx (FDX, Financial) position. The long-standing holding was cut by 50.62% during the quarter with the sale of 1.53 million shares. During the quarter, the shares traded at an average price of $257.69. The holding has gained a staggering 315.11% and the reduction had an overall impact of -1.78%.
FedEx pioneered overnight delivery in 1973 and remains the world's largest "express" package provider. In its fiscal 2020 (ended May 2020), FedEx derived 51% of revenue from its express division, 33% from ground and 10% from freight, its asset-based less-than-truckload shipping segment. The remainder comes from other services, including FedEx Office, which provides document production and shipping and FedEx Logistics, which provides global forwarding. FedEx acquired Dutch parcel delivery firm TNT Express in 2016. TNT was previously the fourth-largest global parcel-delivery provider.
The stock was trading at $307.57 per share with a market cap of $81.61 billion on May 18. The GF Value Line shows the shares trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 5 out of 10. There is currently one severe warning sign issued for assets growing faster than revenue. Last year saw the company's free cash flow slide into negative territory for the second time in recent years as net income made a comeback after a tough 2019.
Canadian National Railway
The trust's Canadian National Railway (CNI, Financial) holding saw a reduction for the second quarter in a row that marked the third change in the holding over the last 12 years. Impacting the portfolio by -1.51%, the sale of 3.07 million shares cut the holding by 18.09%. Throughout the quarter, the shares traded at an average price of $111 and GuruFocus estimates the enormous gain of the holding at 521.16%.
Canadian National's railway spans Canada from coast to coast and extends through Chicago to the Gulf of Mexico. In 2019, the company delivered almost 6 million carloads over its 19,600 miles of track. CN generated roughly 14 billion Canadian dollars ($11.6 billion) in total revenue by hauling intermodal containers (25% of consolidated revenue), petroleum and chemicals (21%), grain and fertilizers (16%), forest products (12%), metals and mining (11%), automotive shipments (6%) and coal (4%). Other items constitute the remaining revenue.
On May 18, the stock was trading at $108.99 per share with a market cap of $76.88 billion. The shares are modestly overvalued based up on the rating given by the GF Value Line.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 2 out of 10. There are currently two severe warning signs issued for new long-term debt and a declining gross margin. In line with the warning sign, the company's cash-to-debt ratio of 0.04 ranks it lower than 92.61% of the industry.
Coupang
For the first time in the trust's history, a new holding was established in Coupang (CPNG, Financial). The holding was created with the purchase of 5.71 million shares that traded at an average price of $46.22 during the quarter. The purchase had an overall impact of 1.35% on the portfolio and GuruFocus estimates the total loss of the holding at -21.40%.
Coupang is an e-commerce company that sells apparel, electronics, footwear, food products, furniture, nutritional supplements and other products.
As of May 18, the stock was trading at $36.87 per share with a market cap of $63.57 billion. There is not currently enough data for the GF Value Line or Peter Lynch Chart to be displayed. The stock took a sharp dive after the stock started trading around $49 per share in March.
GuruFocus gives the company a financial strength rating of 5 out of 10 and there is currently a severe warning sign issued for days inventory building up. The company shows negative operating and net margins and a lack of return on invested capital has also hurt profitability.
Disclosure: Author owns no stocks mentioned.
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