Recently disclosed filings show that the Bill & Melinda Gates Foundation Trust sold the last of its most recently donated Microsoft shares in the first quarter. Currently, about 43% of the foundation’s roughly $3.3 billion U.S. equity portfolio is concentrated in just two stocks — Berkshire Hathaway (BRK.A) and Waste Management (WM).
From growth to value: the Gates Foundation’s investment philosophy
The Gates Foundation Trust’s investment management style favors value stocks — typically businesses with wide competitive moats that are mature and even somewhat “boring.” Growth stocks make up a very small portion of the portfolio. Microsoft has historically been the biggest exception — but that exception no longer exists.
Selling Microsoft is not a sign of bearishness on the company’s prospects. Gates himself still holds about 103 million shares of Microsoft, worth approximately $43 billion, and plans to donate virtually all of his wealth to the foundation over the next 20 years. Therefore, reducing Microsoft exposure in the trust fund in advance is a reasonable financial arrangement. From a fundamental perspective, Microsoft’s cloud computing and software businesses are growing rapidly, with no signs of slowing AI demand. Its forward P/E ratio is about 25 times, which remains attractive for a high-growth company.
Top holding: Berkshire Hathaway
The Gates Foundation’s investment philosophy has been heavily influenced by Warren Buffett — Buffett has long donated shares to the foundation, with the only stipulation being that the foundation must spend the full value of his donation plus an additional 5% of its remaining assets each year. As Berkshire’s share price has climbed, this bar has become increasingly high, but the investment managers have still retained a considerable position.
Currently, Berkshire Hathaway Class B shares account for about 25% of the foundation’s portfolio. Under new CEO Greg Abel, the company delivered solid first-quarter results: the insurance underwriting business improved after last year’s California wildfires, and operating margins in the railroad business are gradually increasing. Abel also made significant moves in the investment portfolio, but strong operating cash flow continues to drive balance sheet cash higher.
Berkshire currently trades at a price-to-book ratio of just 1.4, near a three-year low. Abel conducted a small buyback in the first quarter, but nothing substantial — which may signal his belief that much of the marketable equity portfolio remains overvalued. Still, for ordinary investors, the current price level is already attractive.
Second-largest holding: WM (Waste Management)
WM is a decades-old holding in the Gates Foundation Trust, currently accounting for about 18% of the portfolio. This is exactly the type of company Gates or Buffett would favor — large, dominant, with an extremely wide moat. That moat stems from its network of 262 active solid waste landfills across the U.S., as well as 18 medical waste incinerators. Its massive scale allows it to optimize routes, serving more households with fewer trucks in less time.
The company has strong pricing power, and cost optimization along with its renewable natural gas business is driving margin expansion. Last quarter, EBITDA margin rose to 29.8%, up 70 basis points year over year. Although WM trades at a forward P/E of nearly 27 times — not cheap for a relatively slow-growing company — it still trades at a discount compared to other waste haulers. Its predictable revenue and free cash flow provide a foundation for future growth.
Takeaways
The Gates Foundation’s portfolio changes are not trading signals, but rather a reflection of charitable planning and value investing philosophy. For ordinary investors, Berkshire’s low price-to-book ratio and WM’s moat premium may be more worth considering than simply “copying the homework” itself.