Below we present the list of Bill Gates’ 5 Stock Picks with Huge Upside Potential. For our methodology and a more comprehensive list please see Bill Gates’ 10 Stock Picks with Huge Upside Potential.
5. Chevron Corporation (NYSE:CVX)
Value of Bill & Melinda Gates Foundation Trust’s 13F Position: $3.63 million
Analysts’ Average Upside Estimate: 29.7%
Cracking the top five is Chevron Corporation (NYSE:CVX), which the Bill & Melinda Gates Foundation Trust owns a small stake in as of September 30. While Chevron may not seem to align with Bill Gates’ vision of a future dominated by renewable energy, the company is in fact transitioning towards that goal. Chevron is working to make its operations less carbon intensive in addition to expanding its capabilities in carbon capture, hydrogen, and other green initiatives.
Mizuho has a ‘Buy’ rating and $195 price target on Chevron Corporation (NYSE:CVX) and cites several factors in the company’s favor, including its acquisition of HES, which it expects to unlock greater synergies than initially estimated. The firm also likes Chevron’s focus on renewable energy and its strong balance sheet, through which it can steadily boost the cash it returns to shareholders.
The Carillon Eagle Growth & Income Fund noted why Chevron Corporation (NYSE:CVX) shares got dragged down in Q2 in the fund’s Q2 2023 investor letter:
“Chevron Corporation (NYSE:CVX) stock also traded lower as global oil prices declined in response to fears of an economic slowdown. Energy stocks were the second-worst-performing sector in the quarter.”
4. Schlumberger Limited (NYSE:SLB)
Value of Bill & Melinda Gates Foundation Trust’s 13F Position: $2.74 million
Analysts’ Average Upside Estimate: 34.3%
Schlumberger Limited (NYSE:SLB) is another oil and gas company that Bill Gates owns a small position in, with his Trust adding a 47,005-share position in the company to its 13F portfolio during Q3. Like Chevron, Schlumberger is also undertaking several green initiatives, including carbon capture, improved energy storage, and optimized lithium production.
Analysts are slightly more bullish on Schlumberger Limited (NYSE:SLB) than Chevron right now, while hedge funds prefer the latter. Barclay’s raised its price target on SLB to $77 from $75 in October and has an ‘Outperform’ rating on the stock. The firm believes Schlumberger is best positioned to capitalize on the current cycle as it expands more heavily into offshore drilling. Bank of America has a ‘Buy’ rating on Schlumberger and thinks the company will do well as upstream spending increases on longer-cycle projects.
The Alger Spectra Fund notes that Schlumberger Limited (NYSE:SLB) is growing its international market share in the fund’s Q3 2023 investor letter:
“Schlumberger Limited (NYSE:SLB) provides technology for reservoir characterization, drilling, production, and processing to the oil and gas industry. During the period, shares contributed to performance driven in large part by higher oil prices and strong fiscal second quarter earnings results. Within its quarterly report, the company highlighted growing momentum in international offshore markets that reflected market share gains as well as solid end market activity, leading to strong profit margins and healthy free cash flow generation, in our view.”
3. Coupang, Inc. (NYSE:CPNG)
Value of Bill & Melinda Gates Foundation Trust’s 13F Position: $157 million
Analysts’ Average Upside Estimate: 39.2%
Hedge fund ownership of Coupang, Inc. (NYSE:CPNG) jumped by 16.1% during Q3 to hit an all-time high, with the Bill & Melinda Gates Foundation Trust maintaining its 9.25 million share position in the South Korean e-commerce company. Lee Ainslie’s Maverick Capital owns an enormous position in CPNG as of the end ofQ3, holding 77.1 million shares worth $1.31 billion. The fund’s success is heavily dependent on Coupang’s performance, as it has 29.6% 13F exposure to the stock.
Bank of America and Mizuho each lowered their price targets on Coupang, Inc. (NYSE:CPNG) to $20 from $22 in early November, which still represents greater than 25% upside. Bank of America declared Coupang to be one of the best-run companies that it covers, but expects the higher interest rate environment to weigh on demand. Mizuho cited the stock’s valuation premium as reason for caution.
The Baron Global Advantage Fund shared some of Coupang, Inc. (NYSE:CPNG)’s revolutionary productivity improvements in the fund’s Q3 2023 investor letter:
“Coupang is a leading Korean e-commerce company founded in 2010. It went public in March of 2021, and we have been investors in this Fund since the IPO. After spending half a day with management, touring the company’s fulfillment center, asking questions, and learning more about the reasons behind the remarkable success the company has achieved over the last 13 years, we decided we wanted to own it in this Fund as well. When we originally invested in Coupang, our thesis was constructed around the company’s wide product selection, low prices, and unrivaled convenience thanks to its investments in an end-to-end infrastructure that covers over 70% of Korea’s population, enabling over 99% of orders to be delivered within one day or less, rather than the industry norm of two to three days, driving customer satisfaction, which translates to higher customer retention rates and lifetime value. We thought that Coupang would continue to gain market share in the U.S. $500 billion-plus Korean retail market, while expanding its offerings into additional categories, expanding its ecosystem via a third-party marketplace, and continuing to invest in infrastructure density to further capture inefficiencies, enhancing the customer experience, and improving profit margins. The company has since outperformed our expectations, growing its market share to 25% (#1 in the industry), despite not being a first mover, while building an unrivaled user experience with 99.8% of products delivered the next day (with the majority of them by dawn) and becoming profitable significantly faster than we expected. Our biggest takeaway from the visit was that despite all of Coupang’s success, there is still a long runway of growth ahead. For example, while most of the facility we visited is operated with pickers going to shelves to pick up items for orders, there was one room in which shelves drove themselves to pickers on the back of autonomous robots, which increased picker productivity by 3x. Additionally, while Coupang has been striving to reduce its reliance on distributors, which enables them to expand margins while lowering prices for consumers, a significant opportunity remains for further reduction. Lastly, we got plenty of examples of out-of-the-box thinking (no pun intended) from the company’s singulation process (improves the picking process by reducing the constraint to search for items order by order), decreasing use of boxes (80% of shipments are now boxless), enabling grocery delivery without cold-chain logistics (thanks to end-to-end supplychain efficiency), or how Coupang is able to fill trucks so that each carries more than 2x the parcels a UPS or a FedEx truck can, despite being half the size. The 4% free-cash-flow yield, which is also negatively impacted by the significant reinvestments the company is making into its emerging offerings, also contributed to our decision to add to our Coupang position upon returning to New York.
2. Vroom, Inc. (NASDAQ:VRM)
Value of Bill & Melinda Gates Foundation Trust’s 13F Position: $2.80 million
Analysts’ Average Upside Estimate: 58.0%
Vroom, Inc. (NASDAQ:VRM) has lost a great deal of hedge fund support in the last three years, as there were 36 funds long VRM in Q3 2020, which has fallen to just six funds three years later. One of those funds is the Bill & Melinda Gates Foundation Trust, which took a stake in Vroom during Q2 with an eye on the upside potential that analysts also envision for the stock.
Several analysts have price targets in the $1.00 and up range on Vroom, Inc. (NASDAQ:VRM), which represented downside at the time they were issued, but which now represent close to 50% upside as Vroom shares have continued to sink. Wells Fargo maintained a hold rating on Vroom, Inc. (NASDAQ:VRM) in August, with a $1.00 price target. VRM shares have crashed by 98.7% since the end of September 2020.
1. Schrödinger, Inc. (NASDAQ:SDGR)
Value of Bill & Melinda Gates Foundation Trust’s 13F Position: $197 million
Analysts’ Average Upside Estimate: 59.5%
Topping the list of Bill Gates’ 5 Stock Picks with Huge Upside Potential is AI-based drug discovery company Schrödinger, Inc. (NASDAQ:SDGR), which analysts have pegged for nearly 60% near-term growth. The Bill & Melinda Gates Foundation Trust maintained its holding of 6.98 million SDGR shares during Q3 to remain the largest shareholder of the company. Cathie Wood’s ARK Investment also has a notable stake in Schrödinger, owning 3.52 million shares on September 30.
Analysts have taken a cautious note on Schrödinger, Inc. (NASDAQ:SDGR) in recent weeks given the stock’s 41.3% slide since July 19, but remain bullish on its upside potential. BMO Capital lowered its price target on SDGR to $67 (more than double the current price) from $78 in early August, noting the unpredictability of the company’s revenue timing, but reiterating its positive long-term outlook for the company.
On the other hand, Goldman Sachs maintained a ‘Hold’ rating on Schrödinger, Inc. (NASDAQ:SDGR) on October 20 as it waits for further visibility on the company’s early-2024 outlook, including the contract renewal prospects for its software business. Goldman Sachs analyst Chris Shibutani has a $31 price target on the stock.
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