Why the Gates Foundation's Top 3 Stocks Offer a Rare Opportunity for Long-Term Gains

The Bill & Melinda Gates Foundation Trust has long been a bellwether for patient, value-driven investing, with its portfolio anchored in companies that combine scale, resilience, and transformative potential. As of Q1 2025, its top three holdings—Microsoft (MSFT), Berkshire Hathaway (BRK.B), and Waste Management (WM)—account for nearly 65% of its $41.8 billion portfolio, reflecting a deliberate concentration in firms with enduring moats and secular growth tailwinds. For investors seeking stability amid market volatility, these three stocks present a rare trifecta of strategic logic, undervalued entry points, and alignment with megatrends like AI, infrastructure, and ESG-driven demand. Here's why they deserve a closer look.

1. Microsoft: The AI Engine with a Margin Machine

Microsoft's 25.6% stake in the Gates Foundation's portfolio is no accident. The company's dominance in enterprise software, cloud computing, and AI tools like Azure and OpenAI's partnership positions it to capitalize on the $800 billion AI market opportunity. While its stock has risen steadily over the past decade, it remains undervalued relative to its growth trajectory.

- Defensive Moats: Azure's 24% cloud market share and 18% operating margin create a high-margin, recurring revenue engine.
- AI-Driven Upside: OpenAI's tools (e.g., ChatGPT) are fueling demand for Azure's infrastructure, with AI-related revenue projected to hit $20 billion by 2025.
- Foundation's Trust: The Foundation's unchanged share count since late 2023 signals confidence in Microsoft's long-term trajectory, even as broader tech stocks face valuation scrutiny.

Investment Thesis: Microsoft's P/E of 28x (vs. the S&P 500's 22x) is justified by its structural growth, and its dividend yield of 1% offers stability. A pullback to $250–$260—below its current $375 price—would create a compelling entry point.

2. Berkshire Hathaway: Buffett's Portfolio as a Hedge Against Uncertainty

Despite the Foundation's 12% reduction in Berkshire holdings (selling $1.3 billion of BRK.B shares in Q1 2025), the remaining 21.9% stake underscores its enduring appeal. Warren Buffett's conglomerate is a diversified ballast against macroeconomic shifts, with stakes in insurance (Geico), railroads (BNSF), and consumer brands (Coca-Cola, Apple).

• Buffett's Influence: The company's focus on free cash flow and undervalued assets aligns with the Foundation's long-term horizon (average holding period: 10.6 years).
• Undervalued Catalysts: Berkshire's stock trades at 1.6x book value, below its historical average of 1.8x. Meanwhile, BNSF's rail network and Geico's pricing power in a rising-rate environment offer defensive value.
• Strategic Sell Signal: The Foundation's partial sale may reflect rebalancing, not skepticism—a potential contrarian buy signal for investors.

Investment Thesis: At $530 per share (down 5% YTD), BRK.B offers a 15% upside to its 5-year average valuation. The dividend yield of 0.2% is less compelling, but Buffett's track record of compounding book value (+6% annually since 2010) makes this a “set it and forget it” holding.

3. Waste Management: The ESG-Backed Infrastructure Play

Waste Management's 17.9% portfolio weighting highlights its role as a recession-resistant cash generator. With 95% of its revenue tied to essential waste collection and recycling services, it benefits from rising ESG regulations and urbanization trends.

- Defensive Moat: Its 28 million shares (unchanged since 2023) reflect the Foundation's belief in its pricing power. The company's 5-year average EBITDA margin of 31% outpaces peers.
- AI-Driven Efficiency: WM's use of AI for route optimization and landfill management is cutting costs while expanding margins.
- Undervalued Metrics: At a 9.5x EV/EBITDA (vs. the industry average of 11x), WM offers a 17% discount to peers like Republic Services.

Investment Thesis: A dip to $200–$210 (from its current $231) would align with its 52-week low, creating a high-conviction entry. The 1.5% dividend yield adds incremental value.

Addressing Valuation Concerns

Critics may argue that these stocks are “fully valued” or “overconcentrated.” However:
- Microsoft's AI exposure is still underappreciated in its valuation.
- Berkshire's book value has outpaced its stock price for years—a gap that will eventually close.
- Waste Management's ESG tailwinds are underpriced in a sector still dominated by cyclical fears.

The Foundation's 95.76% concentration in its top 10 holdings (including these three) isn't a risk—it's a strategy. High conviction in proven winners, paired with a 35-quarter average holding period, suggests these are not speculative bets but core holdings for decades.

Final Call: Build a Foundation-Backed Portfolio

For investors with a 5–10 year horizon, replicating the Gates Foundation's top three stakes offers a balanced, growth-oriented portfolio:
- Microsoft for tech leadership.
- Berkshire as a macro hedge.
- Waste Management for ESG resilience.

While short-term volatility may test nerves, the Foundation's track record of long-term holding—and its recent strategic tweaks—suggests these stocks are primed for outperformance. As Buffett once said, “Be fearful when others are greedy, and greedy when others are fearful.” Today, the Foundation's moves signal it's time to be greedy.

Disclosure: The analysis is based on SEC filings and public data. Always conduct your own research or consult a financial advisor before making investment decisions.