In this article, we discuss 5 value stock picks from Bill Gates’ 2022 portfolio. If you want to read our discussion on the latest developments in Gates’ Foundation, go directly to Bill Gates’ 2022 Portfolio: 10 Value Stock Picks.
5. Ecolab Inc. (NYSE:ECL)
Number of Hedge Fund Holders: 47
Bill Gates’ Stake Value: $770,936,000
Percentage of Bill Gates’ 13F Portfolio: 3.9%
Stock Price as of June 14: $150.28
Ecolab Inc. (NYSE:ECL) is a St. Paul, Minnesota-based company involved in the development of water, hygiene, and infection prevention solutions.
The demand for the products offered by Ecolab Inc. (NYSE:ECL) is heavily targeted toward the hospitality industry, and the industry’s recovery following the pandemic is a positive development for Ecolab. Furthermore, there is heavy use of cleaning and hygiene-related products by the travel and leisure sector, which is also staging a slow and gradual recovery. Ecolab Inc. (NYSE:ECL) stock is trading at a forward P/E multiple of 29x as of June 14, which reflects a discount of 16.92% compared to its average five-year forward P/E multiple of 35.40x. The stock is a pure-play on the environment, social governance (ESG) aspect of corporate governance as it offers a solution to fight water scarcity.
On June 2, Joshua Spector at UBS upgraded Ecolab Inc. (NYSE:ECL) stock from a Neutral to a Buy rating and increased the target price from $186 to $205. The analyst sees improvement in pricing power along with the inclusion of variable rates linked with energy prices as positive catalysts for Ecolab Inc. (NYSE:ECL) stock.
Here’s what Baron Funds said about Ecolab Inc. (NYSE:ECL) in its Q1 2022 investor letter:
“Lastly, we added to our position in the leading water, hygiene and infection prevention company, Ecolab Inc. (NYSE:ECL), as the stock sold off on concerns over rising raw material costs. We believe the sell-off is overdone as Ecolab’s strong competitive positioning and proven pricing power would enable it to offset the rising costs (though with a lag). We think that the company will continue benefiting from the secular growth trends towards sustainability, while still having a long runway for growth with only an 8% share of its estimated $147 billion addressable market.”
As of Q1 2022, Ecolab Inc. (NYSE:ECL) was held by 47 hedge funds.
4. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 54
Bill Gates’ Stake Value: $1,638,532,000
Percentage of Bill Gates’ 13F Portfolio: 8.28%
Stock Price as of June 14: $194.79
Caterpillar Inc. (NYSE:CAT) is a Deerfield, Illinois-based manufacturer of construction and mining equipment, diesel and natural gas engines, industrial turbines, and other heavy equipment. The company has taken the initiative to shift its global headquarter to Irving, Texas.
On May 20, Ivan Feinseth at Tigress Financial increased the target price on Caterpillar Inc. (NYSE:CAT) from $278 to $282 and reiterated a Buy rating. The analyst sees strong demand for the company’s products in the end market and considers it well-positioned to benefit from the increase in capital spending as economic activity has started to return to normal after the pandemic. Caterpillar Inc. (NYSE:CAT) announced a new share buyback plan of $15 billion on its analyst day in May. This is equivalent to 13.6% of the current market value of the company.
US President Joe Biden has passed a $1 trillion infrastructure bill into law, which will also be a positive catalyst for Caterpillar Inc. (NYSE:CAT). The stock is trading at $194.7 with a P/E ratio of 16.50x as of June 14. Forbes has estimated Caterpillar Inc.’s (NYSE:CAT) valuation to be around $244 per share, reflecting an upside potential of over 20% from the current stock price.
Oakmark Funds shared its insights on Caterpillar Inc. (NYSE:CAT) in its Q2 2021 investor letter:
“Having followed the company closely for north of a decade, Caterpillar is a name we know well. For much of its history, the operating efficiency of the company left much to be desired, but its underlying competitive position was rarely in doubt. A series of actions over the past decade (e.g., LEAN implementation, improved service mix, optimized manufacturing footprint) helped to narrow the gap between Caterpillar’s potential and its realized results, driving material margin expansion and strong share price performance. In our view, the company remains among the highest quality industrials in the market, but its underlying business is cyclical, which can translate to large swings in both performance and investor sentiment over short time periods. Our ability to focus on the long-term, sustainable earnings power of a business (rather than getting distracted by near-term fluctuations) is our most significant edge when investing in cyclical businesses. Due to the inherent volatility in Caterpillar’s end markets and operating performance, we suspect we’ll have a future opportunity to own this high-quality business at a more attractive price once the cycle turns and today’s enthusiasm wears off.”
Overall, 54 hedge funds reported owning a stake in Caterpillar Inc. (NYSE:CAT) as of Q1 2022.
3. Canadian National Railway Company (NYSE:CNI)
Number of Hedge Fund Holders: 38
Bill Gates’ Stake Value: $1,753,000,000
Percentage of Bill Gates’ 13F Portfolio: 8.86%
Stock Price as of June 14: $108.45
Canadian National Railway Company (NYSE:CNI) is a Montreal, Quebec-based Class I freight railway corporation that serves Canada along with the Midwestern and Southwestern US through its 20,000-mile network. The network connects the Atlantic, the Pacific, and the Gulf of Mexico coasts and transports 300 million tonnes of goods annually.
Canadian National Railway Company (NYSE:CNI) stock is trading at a forward P/FCF ratio of 22.48x. This is the lower end of the 10-year average range, reflecting that the investors are not overpaying. In a note to investors on June 14, Amit Mehrotra at Deutsche Bank highlighted the Canadian National Railway Company (NYSE:CNI) as a short-term investment idea. Before the end of Q2 2022, the analyst is bullish on the outlook of the rail stocks and assumes 7.3% YoY growth in the second half of this year. Mehrotra foresees some rail stocks ending the year with record profits.
Canadian National Railway Company (NYSE:CNI) was held by 38 hedge funds at the end of Q1 2022.
2. Waste Management, Inc. (NYSE:WM)
Number of Hedge Fund Holders: 40
Bill Gates’ Stake Value: $2,953,437,000
Percentage of Bill Gates’ 13F Portfolio: 14.94%
Stock Price as of June 14: $145.62
Waste Management, Inc. (NYSE:WM) is a Houston, Texas-based provider of waste management services like garbage collection and disposal, recycling, and dumpster rental. The $4.6 billion acquisition of Advanced Disposal Services in October 2020 has further cemented the position of Waste Management in the market. The company owns five of the top 10 landfills across the US and manages 11.9 tons of garbage annually.
Waste Management, Inc. (NYSE:WM) stock is a defensive play during these uncertain times. On June 9, Michael Feniger at Bank of America upgraded Waste Management, Inc. (NYSE:WM) stock from an Underperform to a Neutral rating and increased the target price from $155 to $165. The analyst highlighted that Waste Management, Inc. (NYSE:WM) has been able to manage its costs and also improve its pricing power. The reports of core pricing doubling reflect the intention of Waste Management, Inc. (NYSE:WM) to protect its margin amidst rising costs. Waste Management, Inc. (NYSE:WM) stock has a significant upside in environmental demand and has a track record of exceeding expectations in recent quarters. The company’s organic growth has been approximately 7% in recent years, which is why analysts expect Waste Management to be a strong outperformer over the next decade.
Waste Management, Inc. (NYSE:WM) was held by 40 hedge funds as of Q1 2022.
1. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 104
Bill Gates’ Stake Value: $10,123,816,000
Percentage of Bill Gates’ 13F Portfolio: 51.22%
Stock Price as of June 14: $277.64
Berkshire Hathaway Inc. (NYSE:BRK-B) is an Omaha, Nebraska-based diversified conglomerate led by Mr. Warren Buffett as CEO since 1970. Mr. Buffett has 30.7% of voting power and 16.4% ownership of the company.
Berkshire’s insurance investment portfolio, as well as the operating performance of its numerous subsidiaries, improved even further in 2021. In 2022 and 2023, analysts expect the revenue growth and profitability to return to earlier levels, with the Alleghany acquisition—adding to the 2023 results. Berkshire Hathaway Inc. (NYSE:BRK-B) is trading at a P/E ratio of 7.53x as of June 14.
Here’s what Berkshire Hathaway said about Berkshire Hathaway Inc. (NYSE:BRK-B) in its Q4 2021 investor letter:
“BERKSHIRE HATHAWAY INC.
To the Shareholders of Berkshire Hathaway Inc.:
Charlie Munger, my long-time partner, and I have the job of managing a portion of your savings. We are honored by your trust.
Our position carries with it the responsibility to report to you what we would like to know if we were the absentee owner and you were the manager. We enjoy communicating directly with you through this annual letter, and through the annual meeting as well.
Our policy is to treat all shareholders equally. Therefore, we do not hold discussions with analysts nor large institutions. Whenever possible, also, we release important communications on Saturday mornings in order to maximize the time for shareholders and the media to absorb the news before markets open on Monday.
A wealth of Berkshire facts and figures are set forth in the annual 10-K that the company regularly files with the S.E.C. and that we reproduce on pages K-1 – K-119. Some shareholders will find this detail engrossing; others will simply prefer to learn what Charlie and I believe is new or interesting at Berkshire.
Alas, there was little action of that sort in 2021. We did, though, make reasonable progress in increasing the intrinsic value of your shares. That task has been my primary duty for 57 years. And it will continue to be.
What You Own
Berkshire owns a wide variety of businesses, some in their entirety, some only in part. The second group largely consists of marketable common stocks of major American companies. Additionally, we own a few non-U.S. equities and participate in several joint ventures or other collaborative activities.
Whatever our form of ownership, our goal is to have meaningful investments in businesses with both durable economic advantages and a first-class CEO. Please note particularly that we own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves. That point is crucial: Charlie and I are not stock-pickers; we are business-pickers…” (Click here to see the full text)
Berkshire Hathaway Inc. (NYSE:BRK-B) was held by 104 hedge funds as of Q1 2022.
You can also take a peek at the 10 Technology Stocks to Buy According to Kevin Mccarthy’s Breakline Capital and Cathie Wood’s 10 Stock Picks for the Next 5 Years.
