In this article we present the list of Bill Gates' 10 Stock Picks with Huge Upside Potential. Click to skip our discussion of the billionaire’s global initiatives and portfolio activity and jump straight to Bill Gates' 5 Stock Picks with Huge Upside Potential.
The Bill & Melinda Gates Foundation Trust is the asset management branch of the Bill & Melinda Gates Foundation, one of the largest charitable organizations in the world.
A generous annual endowment to the Foundation by hedge fund billionaire Warren Buffett in the form of Berkshire Hathaway Inc. (NYSE:BRK-B) shares has amounted to more than $39 billion for the Foundation to gift to worthy causes and for the Trust to manage.
The man responsible for managing and safeguarding those substantial assets on behalf of Bill Gates is Michael Larson, who serves as CIO of the Trust’s investment office, Cascade Asset Management Company. Larson and his staff employ a fundamental, long-horizon investment philosophy in choosing which companies to invest in.
The primary focus of the Foundation is to combat global inequality, food and water scarcity and safety, disease, and climate change, among other issues. The Trust on the other hand does not appear beholden to investing in companies that the Foundation might consider like-minded, though Cascade has (somewhat controversially) become one of the biggest owners of farmland in the U.S., holding approximately 242,000 acres as of earlier this year.
Rather, its prime directive is to grow the Foundation’s wealth, which likewise aligns it with the goals of most investors. For that reason, we dove into How to Preserve Your Wealth According to Bill Gates’ Portfolio back in September.
That’s not to say there aren’t some synergies between the two, as Cascade owns shares of food safety company Ecolab Inc. (NYSE:ECL) and agricultural equipment manufacturer Deere & Company (NYSE:DE), among other investments.
Dividends are a great way to build a robust and compounding income stream over a long time horizon, which is why the Trust also hasn’t shied away from owning those stocks. We took a look at Bill Gates’ 11 Dividend Stocks just last month, some of which double as top Bill Gates stocks with massive upside potential.
The Trust invests most heavily in three sectors, as we detailed in our look at 5 Sectors to Invest In to Preserve Your Wealth According to Bill Gates’ Portfolio. Over 92% of the value of the Trust’s 13F assets were in three key sectors as of June 30: Finance, Technology, and Industrial, and those allocations remained largely unchanged during Q3. The value of its 13F assets stood at $38.9 billion as of September 30, down from $42.1 billion in the middle of 2023.
In this article, we’ll take a look at some of the Trust’s less heralded stock picks, which may nonetheless have the greatest upside potential of any of them according to analysts.
To uncover Bill Gates’ top stock picks with huge upside potential, we scanned the top 50 holdings of the Bill & Melinda Gates Foundation Trust for the ten stocks with the highest average upside estimates among analysts that cover those stocks. The stocks are ranked based on upside estimates.
The following holdings data is gathered from the Bill & Melinda Gates Foundation Trust’s 13F filing with the SEC. We follow hedge funds like the Bill & Melinda Gates Foundation Trust because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q3 2023 reporting period.
Bill Gates' 10 Stock Picks with Huge Upside Potential
10. Cisco Systems, Inc. (NASDAQ:CSCO)
Value of Bill & Melinda Gates Foundation Trust’s 13F Position: $3.33 million
Analysts’ Average Upside Estimate: 20.4%
Chevron Corporation (NYSE:CVX), Coupang, Inc. (NYSE:CPNG), and Schlumberger Limited (NYSE:SLB) are just a few of the diverse selection of stocks in Bill Gates’ 13F portfolio that have double-digit upside potential. Cisco Systems, Inc. (NASDAQ:CSCO) is another stock that analysts think highly of, having an average price target of $58.38 on it, representing greater than 20% upside potential. Hedge fund ownership of Cisco rose by 15.8% in Q3, with the Bill & Melinda Gates Foundation Trust being one of several funds to go long CSCO during the quarter.
Cisco Systems, Inc. (NASDAQ:CSCO) shares took a double-digit hit last month after the networking giant lowered its full-year guidance to between $53.8 billion and $55 billion, a $3.2 billion drop off on each end of the guidance range. Several analysts lowered their price targets on Cisco in the aftermath, though their consensus price target still projects more than 20% upside.
Oppenheimer lowered its price target on CSCO to $54 in mid-November, down from $58, which still represents more than 11% upside. The firm maintained its ‘Outperform’ rating on Cisco. Likewise, Evercore ISI lowered its Cisco price target to $55 from $63 on the same day and also maintained an ‘Outperform’ rating on the stock.
Oakmark Fund expects Cisco Systems, Inc. (NASDAQ:CSCO)’s changing business model to accelerate revenue growth, as the fund discussed in its Q3 2023 investor letter:
“Cisco Systems, Inc. (NASDAQ:CSCO) is the leading networking solutions company. Networking equipment becomes more important as businesses modernize their IT infrastructure, and Cisco is well positioned to capture this demand given its broad portfolio and highly effective go-to-market strategy. Cisco is transitioning away from selling mainly transactional hardware and toward selling more software and subscriptions. This shift is expected to accelerate revenue growth, improve operating margins and build recurring revenue. Despite these notable business improvements, Cisco still trades near a trough valuation relative to the S&P 500 Index. More recently, Cisco announced its intention to acquire Splunk, a leader in security and observability, adding to its already strong position in the increasingly important security market. At a low-teens multiple of our estimate of normalized earnings, Cisco is trading comfortably below our estimate of intrinsic value.”
9. Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF)
Value of Bill & Melinda Gates Foundation Trust’s 13F Position: $487 million
Analysts’ Average Upside Estimate: 21.2%
The Gates Foundation Trust’s position in Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) was unchanged during Q3 at over 6.21 million shares. It ranked as the sixth-largest holding in Bill Gates’ 13F portfolio on September 30. The Mexican distributor of Cola-Cola products was owned by ten other funds, including
Keith Meister’s Corvex Capital, which added KOF to its portfolio in Q3, buying 464,160 shares.
Analysts have been raising their price targets on Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) throughout 2023 and believe the stock could make a good tandem play in combination with KO shares, giving investors a cheaper multiple and higher yield than they’d get with KO shares alone. UBS has an $83 price target and ‘Neutral’ rating on KOF, while Goldman Sachs raised its price target on KOF to $92.70 from $83.40 in early August.
The HL International Equity Strategy discussed some of the strategic moves planned by Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) in the fund’s Q1 2023 investor letter:
“The Consumer Staples sector delivered the strongest relative performance, with cosmetics producer L’Oréal and Coke bottler and convenience store operator Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) especially strong. FEMSA rallied after announcing a strategic review, which will refocus the company on its strongest businesses and divest non-core assets, punctuated by cutting its large stake in Heineken.
In terms of geographical performance, the eurozone emerged as the top-performing region, and our stocks did better still, fueled by the strong performance of Infineon, L’Oréal, and Schneider Electric. EMs, which lagged the index, were boosted by the improving outlook for semiconductor companies TSMC and Samsung. Mexico’s FEMSA also contributed strongly to relative returns.”
8. United Parcel Service, Inc. (NYSE:UPS)
Value of Bill & Melinda Gates Foundation Trust’s 13F Position: $118 million
Analysts’ Average Upside Estimate: 21.9%
United Parcel Service, Inc. (NYSE:UPS) is one of 17 Stocks Warren Buffett Just Bought and Sold, as the Oracle of Omaha, whose long-time right-hand man Charlie Munger recently passed away at the age of99, sold off his former stake in UPS during Q3. Overall hedge fund ownership of UPS also dipped slightly during the quarter. On the other hand, Bill Gates’ UPS holding was raised by 2% to 755,089 shares.
United Parcel Service, Inc. (NYSE:UPS)’s revenue has fallen year-over-year during each of the first three quarters, but analysts predict that decline coming in at 5% in Q4, which would be its best quarter of2023. Nonetheless, analysts have been lowering their price targets on UPS, though their consensus still projects strong upside.
JPMorgan and Susquehanna have each lowered their price targets on UPS over the past two months and have ‘Neutral’ ratings on it. On the other hand, Raymond James has a ‘Strong Buy’ rating and $200 price target on UPS shares.
The ClearBridge Large Cap Value Strategy likes the long-term upside potential of United Parcel Service, Inc. (NYSE:UPS)’s new union deal, as the fund discussed in its Q3 2023 investor letter:
“A higher-for-longer rate mentality taking hold was a headwind for economically sensitive stocks. Rising wages have been one of the main drivers of inflation, and this has proved to be a sticky area, keeping the Fed’s attention and weighing on share prices. For example, United Parcel Service, Inc. (NYSE:UPS) renegotiated a wage increase for its union-backed workforce this summer, which weighed on margins that were already being constricted by slowing volumes. While the new union deal will dampen profits over the next 12 months due to the front-end-loaded nature of the new five-year contract, management gained increased flexibility to deploy automation, which we think should further enhance UPS’s strong competitive position and provide a long-term tailwind to profitability.”
7. NVIDIA Corporation (NASDAQ:NVDA)
Value of Bill & Melinda Gates Foundation Trust’s 13F Position: $3.99 million
Analysts’ Average Upside Estimate: 25.8%
The Bill & Melinda Gates Foundation Trust added high-flying NVIDIA Corporation (NASDAQ:NVDA) to its 13F portfolio during Q3, buying 9,165 shares. Those NVDA shares are 227% more valuable than they were at the start of 2023 and hedge funds have been buying them in droves in recent quarters. Nearly twice as many funds are long Nvidia as of September 30 compared to a year earlier.
Analysts remain bullish on NVIDIA Corporation (NASDAQ:NVDA) even in the wake of the stock’s meteoric rise and premium valuation. Nvidia’s growing dominance in the chip market and particularly its significant lead in AI has left analysts far less enthused about some of the company’s rivals like Intel Corporation (NASDAQ:INTC) and Micron Technology, Inc. (NASDAQ:MU). Analysts are estimating a 20% drop for Intel shares and only ever-so-slight gains for MU shares.
Bank of America predicts “substantial” earnings growth for Nvidia, noting the generative AI wave is still in its early stages. The firm believes NVDA’s 24x forward P/E appears cheap given its earnings potential.
The O’keefe Stevens Advisory believes NVIDIA Corporation (NASDAQ:NVDA) is one of the five best companies in the world today, as it shared in its Q3 2023 investor letter:
“This quarter, we actively reduced our position in our favorite company, NVIDIA Corporation (NASDAQ:NVDA). Over the past several years, I have consistently noted the concentration of the top 5 holdings in our portfolio, with NVDA comprising 26% of the last quarter’s 40%. The business, management, and outlook are nothing short of excellent. The business has a dominant market share in a rapidly growing market with competition seemingly years behind, though, fighting hard to gain share. Gross margin is expected to exceed 70% in 2024 and expand in 2025, reflecting the premium customers pay for their advanced technology. Revenue growth of 30%+ on a $50B base and a return on equity over 50%. If this isn’t the best business in the world currently, certainly it is in the top 5.
Jensen is the reason we held onto the stock despite our unease about the valuation. Jensen came to the U.S. from Thailand and was sent to a boarding school in rural Kentucky for troubled youth by his aunt and uncle, who mistook it for a prep school. When buying an ownership stake in the business, we must ask ourselves who we partner with. Are they honest? Capable? Aligned?
Honest: Listening to Jensen (while promotional) is like a breadth of fresh air. He tells you how it is. When the business looked like it was headed for failure in 2009, Jensen reduced his salary to $1….”
6. Hormel Foods Corporation (NYSE:HRL)
Value of Bill & Melinda Gates Foundation Trust’s 13F Position: $83.5 million
Analysts’ Average Upside Estimate: 26.5%
Closing out the first half of the list is Hormel Foods Corporation (NYSE:HRL), which Bill Gates owns nearly 2.20 million shares of as of September 30, unchanged quarter-over-quarter. He is the largest shareholder of the stock, which other hedge funds have been selling out of during the past two quarters, as the number of funds long HRL has dipped by 36.7% during that time.
Analysts are somewhat divided on Hormel Foods Corporation (NYSE:HRL)’s updated strategic plan, which was revealed in October, though the consensus upside projections are strong. The company expects to grow operating income by more than $250 million over the next three years through the implementation of its strategic vision, the bulk of which will be achieved through cost-reduction efforts.
Piper Sandler lowered its price target on Hormel to $35 shortly after that plan was unveiled, which still represents upside of more than 10%. On the other hand, Goldman Sachs slashed its price target on HRL shares to $26 at the end of November and has a ‘Sell’ recommendation on them.
Mairs & Power Growth Fund isn’t worried by Hormel Foods Corporation (NYSE:HRL)’s lagging prices and excess inventory, which the fund discussed in its Q1 2023 investor letter:
“The largest detractors from relative performance in the quarter were US Bank, Charles Schwab, UnitedHealth Group (UNH), and Hormel Foods Corporation (NYSE:HRL). Finally, Hormel struggled in the first quarter with excess inventories and pricing that has not kept up with peers. We have cautiously added to the position, as it will likely take some time for the management team to get its operations in order.”
See why Schlumberger Limited (NYSE:SLB), Chevron Corporation (NYSE:CVX), and Coupang, Inc. (NYSE:CPNG) are so highly thought of by investors and analysts alike by clicking the link below.
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Disclosure: None. Bill Gates' 10 Stock Picks with Huge Upside Potential is originally published at Insider Monkey.