A few weeks into the final quarter of a tumultuous year, a handful of stocks in Bill Gates (Trades, Portfolio)’ foundation trust portfolio are trading near their 52-week lows as the market continues to contend with rising inflation and interest rate hikes.
Similarly, after posting a 28.7% total return for 2021, the S&P 500 Index has fallen around 22.44% so far this year.
While Gates, who is the founder of Microsoft Corp. (MSFT) and one of the richest people in the world, does not actively manage The Bill & Melinda Gates Foundation Trust, he does guide the portfolio managers in voting proxies consistent with the principles of good governance and management. The trust also considers other issues beyond corporate profits, including defining areas in which it will not invest.
In an interview with CNBC’s Diana Olick on Tuesday, Gates commented on environmental, social and governance criteria. Earlier this year, the Securities and Exchange Commission proposed new rules that would prevent U.S. funds from making misleading or deceptive claims on their ESG qualifications and increase disclosure requirements for those funds.
Gates argued that while corporate sustainability credentials are often controversial, they are still necessary for assessing whether or not to invest in a company. However, ESG definitions vary and can be difficult to measure, creating issues for businesses that are wanting to tout their sustainability qualifications to investors.
“The whole measurement thing is a little immature,” Gates said. “The field is going to get mature on that. But having that environmental incentive — a lot of investors really do want to get that information.”
The second-quarter 13F filing showed the foundation trust’s equity portfolio consisted of 20 stocks as of the three months ended June 30, which was valued at $17.68 billion. The holdings have posted mostly negative performances so far in 2022, with 17 of the positions declining.
As of Wednesday, Gates’ stocks that have collapsed to near their lowest prices in a year were Carvana Co. (CVNA, Financial), Vroom Inc. (VRM, Financial) and Weber Inc. (WEBR, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Carvana
Carvana’s (CVNA, Financial) shares have tumbled more than 90% over the past year. The stock is currently 0.48% below its yearly low of $16.43.
Gates’ foundation trust owns 520,000 shares of the company, which represent 0.07% of the equity portfolio. It established the position during the second quarter.
The Tempe, Arizona-based company, which operates an online platform for buying and selling used cars and is known for its multi-story car vending machines, has a $1.71 billion market cap; its shares were trading around $16.13 on Wednesday with a price-book ratio of 3.48 and a price-sales ratio of 0.11.
Carvana’s financial strength and profitability were both rated 3 out of 10 by GuruFocus. As a result of the company issuing new long-term debt over the past several years, it has weak interest coverage. The Altman Z-Score of 1.45 also warns it could be at risk of bankruptcy since assets are building up at a faster rate than revenue is growing and the Sloan ratio is indicative of poor earnings quality. Further, the weighted average cost of capital overshadows the return on invested capital, so the company is struggling to create value as it grows.
While the operating margin is expanding, the company’s returns on equity, assets and capital are negative and underperform a majority of competitors. Carvana also has a low Piotroski F-Score of 1 out of 9, meaning business conditions are in poor shape. It has also recorded losses in operating income in recent years.
Of the gurus invested in Carvana, Baillie Gifford (Trades, Portfolio) has the largest stake with 10.31% of its outstanding shares. Steven Cohen (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Lee Ainslie (Trades, Portfolio), Philippe Laffont (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Chase Coleman (Trades, Portfolio) also own the stock.
Vroom
Shares of Vroom (VRM, Financial) have declined approximately 95% over the last 12 months. The stock is currently 2.50% above its annual low of $1.
The trust owns 2.5 million shares of the company, reflecting 0.02% of its equity portfolio. The holding was established during the second quarter.
The retail company headquartered in Houston, which operates an online platform for buying, selling and financing cars, has a market cap of $142.25 million; its shares were trading around $1.03 on Wednesday with a price-book ratio of 0.28 and a price-sales ratio of 0.04.
GuruFocus rated Vroom’s financial strength 3 out of 10. Due to the company issuing new long-term debt over the past several years, it has weak interest coverage. The low Altman Z-Score of -0.05 also indicates it is in poor shape as it has recorded losses in operating income.
The company’s profitability fared even worse, scoring a 1 out of 10 rating on the back of negative margins and returns that are underperforming versus industry peers. Vroom also has a low Piotroski F-Score of 3.
With a 1.81% stake, Gates’ foundation trust is the company’s largest guru shareholder. Other gurus invested in Vroom are Simons’ firm, Mario Gabelli (Trades, Portfolio), Jones and Caxton Associates (Trades, Portfolio).
Weber
Weber’s (WEBR, Financial) shares have sunk approximately 67% over the past year. The stock is currently 3.15% above its annual low of $5.72.
Gates’ foundation trust owns 2.5 million shares of the company, accounting for 0.10% of its equity portfolio.
The Palatine, Illinois-based company, which manufactures charcoal, gas and electric outdoor grills, has a $307.83 million market cap; its shares were trading around $5.80 on Wednesday with a price-sales ratio of 0.29.
Weber’s financial strength was rated 3 out of 10 by GuruFocus, driven by a low Altman Z-Score of 0.9. The company’s days inventory is also building up as revenue per share declines.
The company’s profitability scored a 5 out of 10 rating despite having negative margins and returns that are underperforming a majority of competitors.
Gates’ foundation is currently the only guru invested in the stock with a 4.73% stake.
