The Bill and Melinda Gates Foundation Trust, founded by Bill Gates (Trades, Portfolio) and his ex-wife Melinda in 2000, is the largest private foundation in the world and was established to manage and distribute income from investments. This income is used to help encourage and fund philanthropic business activity.
Thanks to the success of the outside management team that oversees the trust’s investments, five separate holdings have achieved gains well in excess of 300% since their inception. These holdings include Ecolab Inc. (ECL, Financial), Caterpillar Inc. (CAT, Financial), Waste Management Inc. (WM, Financial), Canadian National Railway Co. (CNI, Financial) and Crown Castle International Corp. (CCI, Financial).
Ecolab
Managers of the trust first bought into Ecolab (ECL, Financial) in the second quarter of 2010 with a purchase of 2.50 million shares. The original purchase saw the shares trading at an average price of $46.69 throughout the quarter. Over the last decade of ownership, the trust’s managers have added an additional 1.86 million shares with average prices ranging from $48.59 to $106.32 per share. Overall, the 4.36 million shares that currently make up the holding were purchased at an average price of $47.91 per share and have netted the trust an estimated gain of 346.80%.
Ecolab produces and markets cleaning and sanitation products for the hospitality, health care and industrial markets. The company is the global market share leader in this category with a wide array of products and services, including dish and laundry washing systems, pest control and infection control products. The company has a strong hold on the U.S. market and is looking to increase its profitability abroad. Additionally, Ecolab serves customers in water, manufacturing and life sciences end markets, selling customized solutions.
On July 15, the stock was trading at $214.58 per share, up 0.39%, with a market cap of $61.22 billion. According to the GF Value Line, the shares are trading at a fair value rating.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 1 out of 10. There are currently two severe warning signs issued for the company for declining revenue per share and a declining gross margin percentage. The company’s cash-to-debt ratio of 0.17 is well below industry standard, but an Altman Z-Score of 4.77 places the company well into the safe zone without fear of bankruptcy.
Other top guru owners of Ecolab (ECL, Financial) include Baillie Gifford (Trades, Portfolio), Mairs and Power (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Robert Karr (Trades, Portfolio).
Caterpillar
The trust saw a position established in Caterpillar (CAT, Financial) at the beginning of 2009. The original purchase brought in 7.59 million shares that traded at an average price of $31.78 at the time. Since the original purchase, managers have made numerous additions to the holding at an average price of $44.69 per share. The first quarter of 2021 saw the position reduced for the first time since it was established as share prices exceeded $200. Caterpillar share prices jumped drastically over the last two years and the position has landed at an estimated gain of 371.32% overall.
Caterpillar is an iconic manufacturer of heavy equipment, power solutions and locomotives. It is currently the world's largest manufacturer of heavy equipment with over 15% market share in 2020. The company is divided into four reportable segments: construction industries, resource industries, energy and transportation and Caterpillar Financial Services. Its products are available through a dealer network that covers the globe with over 2,000 branches maintained by 168 dealers. Caterpillar Financial Services provides retail financing for machinery and engines to its customers, in addition to wholesale financing for dealers, which increases the likelihood of Caterpillar product sales.
As of July 15, the stock was trading at $211.22 per share with a market cap of $115.70 billion. The shares are significantly overvalued as seen by the reduction of the position in the trust’s portfolio and the GF Value Line’s rating.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 1 out of 10. There are currently no severe warning signs issued for the company. The above-average profitability rank is propped up by operating and net margins that beat at least 77% of industry competitors.
Caterpillar is also owned by the T Rowe Price Equity Income Fund (Trades, Portfolio), Catherine Wood (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio) and Richard Snow (Trades, Portfolio).
Waste Management
The trust’s Waste Management (WM, Financial) position came into play at the beginning of 2009 with 7.81 million shares. The position was doubled in the third quarter of that year as share prices dropped from $28.71 to $18.26 on average per share during the quarter. The position grew two more times in 2010 as share prices began to climb, but the average price paid per share remains lower than the initial purchase price at $25.19 per share. Waste Management has been a consistent earner for the portfolio, rising 23.07% year to date, and has netted the trust a total gain of a heaping 475.85%.
Waste Management ranks as the largest integrated provider of traditional solid waste services in the United States, operating approximately 268 active landfills and about 350 transfer stations (includes acquired Advanced Disposal landfills and transfer stations). The company serves residential, commercial and industrial end markets and is also a leading recycler in North America.
The stock towered at $145.25 per share with a market cap of $61.24 billion on July 15. With the large price increase over the last year, the GF Value Line shows the stock trading at a modestly overvalued rating.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 2 out of 10. There is currently one severe warning sign issued for assets growing faster than revenue. The company has settled into consistent returns on capital that easily support a decreasing weighted average cost of capital, leading to comfortable profits.
Fisher, Jim Simons (Trades, Portfolio)'s Renaissance Technologies, Sarah Ketterer (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio) also maintain a position in Waste Management.
Canadian National Railway
Coming in second overall is a position in Canadian National Railway (CNI, Financial) that the trust has also held since 2009. The holding was established when managers purchased 16.79 million shares that traded at an average price of $17.35 per share during the quarter they were purchased. The holding was boosted in the third quarter of 2010 by 327,568 shares, but 3.21 million shares were sold between the fourth quarter of 2020 and the first quarter of 2021 as share prices rose over $100. GuruFocus estimates that the holding has gained a staggering 503.23% over the years.
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. It generated roughly 14 billion Canadian dollars ($11.11 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 July 15, the stock was trading at $105.12, up 17.40% year to date in the trust’s portfolio, with a market cap of $74.25 billion. According to the GF Value Line, the shares are trading at a fair value rating.
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 declining gross and operating margins. 2020 saw the company’s free cash flow jump to the highest in the last decade after several years of decreasing returns.
Other top gurus with positions in Canadian National Railway include Fisher, Simons' firm, Dalio, Pioneer Investments (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio).
Crown Castle International
The trust’s Crown Castle International (CCI, Financial) holding tops the list with an astounding 956.78% in total estimated gain over the years. Managers have only made one singular change to the holding as shares were sold in the first quarter of this year. GuruFocus shows the average price paid for the shares in the position at a measly $18.99 on average and the sale earlier this year saw shares trading at $160.26 per share on average during the quarter.
Crown Castle International owns and leases roughly 40,000 cell towers in the United States. It also owns more than 80,000 route miles of fiber. It leases space on its towers to wireless service providers, which install equipment on the towers to support their wireless networks. The company's fiber is primarily leased by wireless service providers to set up small-cell network infrastructure and by enterprises for their internal connection needs. Crown Castle's towers and fiber are predominantly located in the largest U.S. cities. The company has a very concentrated customer base, with more than 70% of its revenue coming from the big three U.S. mobile carriers. Crown Castle operates as a real estate investment trust.
As of July 15, the stock was trading at $202.17 per share, well above the average price seen during the trust’s singular sale, with a market cap of $87.38 billion. Due to the recent rise in share price, the GF Value Line shows the stock trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 1 out of 10. There are currently four severe warning signs issued for the company including new long-term debt and poor financial strength. Despite the warning signs, the company has steadily increased revenue and net income since 2017.
Crown Castle International is also held by Fisher, Ken Heebner (Trades, Portfolio), Chris Davis (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
