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 second quarter of 2021. The trust saw three trades during the quarter that boosted its position in Berkshire Hathaway Inc. (BRK.B, Financial) and sold out of its positions in Liberty Global PLC (LBTYK, Financial) (LBTYA, Financial). After the quarter, managers of the trust also made a new buy into Aberdeen Emerging Markets Equity Income Fund, Inc. (AEF, 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 trust’s portfolio contained 17 stocks, with the one new holding added in July. It was valued at $20.96 billion and has seen a turnover rate of 1%. Top holdings in the portfolio include Berkshire Hathaway, Waste Management (WM, Financial), Caterpillar Inc. (CAT, Financial), Canadian National Railway Co. (CNI, Financial) and Walmart Inc. (WMT, Financial).
The top sectors represented are financial services (50.87%), industrials (30.66%) and consumer defensive (5.87%).
Berkshire Hathaway
Managers of the trust boosted its position in Berkshire Hathaway (BRK.B, Financial) by 17.74% with the purchase of 6.58 million shares. The shares traded at an average price of $278.90 during the quarter. Overall, the addition had a 7.66% impact on the portfolio and GuruFocus estimates the total gain of the holding at 9.29%.
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 Aug. 17, the stock was trading at $289.17 per share with a market cap of $653.19 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 5 out of 10. There is currently one severe warning sign issued for assets growing faster than revenue. Despite the warning sign, the company’s exceptional return on assets of 12.33% ranks it better than 95.83% of industry competitors. An equally strong return on equity also helps to prop up the company’s profitability rank.
Other top gurus invested in Berkshire Hathaway (BRK.B, Financial) include Diamond Hill Capital (Trades, Portfolio), Tom Russo (Trades, Portfolio), Pioneer Investments, Hotchkis & Wiley and Chris Davis (Trades, Portfolio).
Liberty Global
The trust cut ties with its holdings in Liberty Global (LBTYK, Financial) (LBTYA, Financial). The remaining 507,517 shares of the class C shares were sold and landed the trust at an estimated loss of 3.44%. The shares sold at an average price of $26.92 throughout the quarter. The sale had a -0.06% impact on the portfolio overall.
The holding of Liberty’s class A shares performed much better for the trust, bringing in a total estimated gain of 40.45% over a decade-long holding period. Managers sold the remaining 380,772 shares at an average price of $26.94 during the quarter for an overall impact on the portfolio of -0.05%.
Liberty Global is one of the largest cable owners in Europe, with operations in the United Kingdom (50%-owned), Switzerland, Belgium (60%-owned), the Netherlands (50%-owned), Ireland, Poland and Slovakia. The firm sold its businesses in Germany, Romania, Hungary and the Czech Republic to Vodafone (VOD, Financial) in 2019, generating $11 billion in proceeds, and merged its U.K. business with wireless carrier O2 in June 2021. The firm's operations serve about 5.5 million Internet access customers in the U.K., 1.7 million in Belgium, 1.1 million in Switzerland and 3.4 million in the Netherlands. Liberty also provides wireless services in each of these four markets to a combined 41 million customers, including 27 million at O2.
As of Aug. 17, Liberty Global (LBTYK, Financial) class C shares were trading at $28.87 per share with a market cap of $16.04 billion. The GF Value Line shows the stock trading at a fairly valued rating.
The company’s class A shares traded at $28.52 per share with a market cap of $16.03 billion on Aug. 17. Similarly, the shares are fairly valued according to the GF Value Line.
GuruFocus gives both stocks a financial strength rating of 4 out of 10 and a profitability rank of 5 out of 10. There is a severe warning sign for each issued for a declining gross margin percentage. The company has struggled to find a balance in profitability over the last decade as the weighted average cost of capital has exceeded the return on invested capital.
Guru shareholders that maintain positions in Liberty Global (LBTYK, Financial) (LBTYA, Financial) include Dodge & Cox, Jim Simons (Trades, Portfolio), David Herro (Trades, Portfolio) and Seth Klarman (Trades, Portfolio).
Aberdeen Emerging Markets Equity Income Fund
After the end of the quarter, on July 22, the trust established a new position in Aberdeen Emerging Markets Equity Income Fund (AEF, Financial). Managers purchased 2.60 million shares that traded at an average price of $8.80 on the day of the transaction. The purchase had an overall impact of 0.11% on the portfolio and GuruFocus estimates the holding has lost -1.02% on the position since it was established.
Aberdeen Emerging Markets Equity Income Fund is a closed-end investment company. Its investment objective is to seek total return, consisting of capital appreciation and income, by investing primarily in Chilean securities. It invests in the public equity and fixed income markets of Chile. The fund invests in a range of sectors, including financials, consumer staples, utilities, consumer discretionary, materials, energy, information technology, telecommunication services, healthcare, real estate and industrials.
On Aug. 17, the stock was trading at $8.65 per share with a market cap of $439.12 million. According to the Peter Lynch Chart, the shares are trading near intrinsic value.
GuruFocus gives the company a financial strength rating of 4 out of 10 and a profitability rank of 2 out of 10. There are currently two severe warning signs issued for a low Piotroski F-Score and declining revenue per share. The company’s revenue and net income have both fallen off over the last several years after coming back from a significant deficit in 2018.
