Bill & Melinda Gates Foundation’s 13F Picks Show Strong Results

Michael Larson might be relatively unknown, perhaps owing to the fund manager’s efforts to stay out of the public eye, but he certainly has one of the most high profile jobs in the asset management industry. The 57 year old money manager is the chief investment officer of Bill & Melinda Gates Foundation, which has an endowment of over $44 billion, according to its last financial report. After analyzing the foundation’s equity positions in companies with a capitalization of over $1 billion from the latest 13F, it seems that it did pretty well in the first quarter as returns for the period, based on this metric, amounted to 7.6%. This definitely warrants a look at the firm’s top picks for the quarter.

Our research determined that following the small-cap stocks, that hedge funds are collectively bullish on, can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).

#5 Wal-Mart Stores, Inc. (NYSE:WMT)

– Shares Owned by Gates Foundation (as of December 31): 11.6 Million

– Value of Holding (as of December 31): $711.26 Million

During the first three months of the year shares of the $213 billion retailer rose sharply by more than 12%. Wal-Mart Stores, Inc. (NYSE:WMT) is undergoing a shakeup as it comes to terms with the fierce competition in the retail space and a shift to online shopping. The last fiscal year marked the first time that Wal-Mart’s sales dropped since at least 1980. Among various other measures, the company is closing down stores in less profitable locations, including rural areas and opening new ones in areas of higher growth opportunities. Up till now, 154 stores in the US have been closed. Legendary value investor Warren Buffett’s Berkshire Hathaway is one of the largest stockholders of Wal-Mart Stores, Inc. (NYSE:WMT) holding some 56.19 million shares.

#4 Caterpillar Inc. (NYSE:CAT)

– Shares Owned by Gates Foundation (as of December 31): 11.26 Million

– Value of Holding (as of December 31): $765.29 Million

Gates Foundation’s holding in Caterpillar Inc. (NYSE:CAT) remained unchanged during the October-December period and the company’s stock surged by nearly 13% in the following quarter. The hike has come despite the management’s warning that its first quarter financial results will in all likelihood fall below the analysts’ expectations. However, they still believe that the company will be able to deliver on its full-year guidance. Shares of the $43 billion heavy-equipment manufacturer are still trading 14% below their 52 week high as the global slowdown has hit the company hard and the future still looks somewhat uncertain. Billionaire David Shaw‘s D. E. Shaw & Co. cut its stake in Caterpillar Inc. (NYSE:CAT) by 29% to 522,400 shares during the fourth quarter.

#3 Canadian National Railway (USA) (NYSE:CNI)

– Shares Owned by Gates Foundation (as of December 31): 11.26 Million

– Value of Holding (as of December 31): $765.29 Million

The Montreal-based $49 billion transportation company has been another winner for Larson in the first three months of this year as its shares surged by almost 11.5%. While cheap oil prices have meant less operational costs for Canadian National Railway (USA) (NYSE:CNI), it also led to fewer carloads filled with oil or fracking sands. However, despite a decline in revenue, the bottom line for the fourth quarter grew by 11% as compared to the same quarter a year ago. As far as the company’s top line trend is concerned, it was recently reported that the rail traffic volume in U.S declined by 12% in the first 12 weeks of the year, the major drag coming from the carloads of energy-related commodities. Daniel Bubis‘ Tetrem Capital Management hiked its Canadian National Railway (USA) (NYSE:CNI) stake by 6% to 1.29 million shares during the fourth quarter.

#2 Waste Management, Inc. (NYSE:WM)

– Shares Owned by Gates Foundation (as of December 31): 18.63 Million

– Value of Holding (as of December 31): $994.48 Million

The foundation’s second largest holding also remained unchanged during the fourth trimester, but the company’s stock has posted gains of almost 11% in the first quarter. Waste Management, Inc. (NYSE:WM), the largest professional garbage hauler in North America has faced headwinds in the form of low commodity prices, which cut into its revenues and also lower oil prices, which not only stymied the company from getting significant fuel surcharges, but it also led to the production of more fresh plastic as opposed to the recycled one, as the former became cheaper to produce than the latter. However, Waste Management is still guiding for  a 5% improvement in profitability in 2016. Cliff Asness‘ AQR Capital Management believes in Waste Management, Inc. (NYSE:WM)’s business model and upped its stake in the company by 24% to 3.18  million shares during the third quarter.

#1 Berkshire Hathaway Inc. (NYSE:BRK.B)

– Shares Owned by Gates Foundation (as of December 31): 74.38 Million

– Value of Holding (as of December 31): $9.82 Billion

The stock price of the Omaha-based holding company rose by nearly 9% in the first quarter. Although Berkshire’s energy unit,Berkshire Hathaway Energy Co., reported doubling of tax benefits to $1.8 billion in 2015 from the year ago period, some analysts have been bearish on the unit as it doesn’t pay dividends (while peers have a dividend payout ratio of 50% to 65%), and the debt that it accumulated in order to finance its last two acquisitions. Boykin Curry‘s Eagle Capital Management boosted its Berkshire Hathaway Inc. (NYSE:BRK.B) holding by 11% during the fourth quarter to 12.40 million shares.

Disclosure: None