It’s been a good year for Bill Gates. According to the Bloomberg Billionaires Index, the Microsoft (NASDAQ:MSFT) co-founder’s net worth is up $15.5 billion to $125 billion. The Seattle entrepreneur and philanthropist makes a significant amount from his Microsoft holdings. However, Bill Gates’ investing strategy also involves buying large positions in other well-run companies and holding them indefinitely.
Google the words “Bill Gates stocks 2023” and you get more than 51 million results. In other words, investors are very interested in what Gates does with his money. For instance, in February, there was plenty of media attention surrounding Gates buying shares of Heineken (OTCMKTS:HKHHY), the Dutch beer giant. He purchased the 3.76% stake from Femsa (NYSE:FMX), a Mexican operator of convenience stores and pharmacies.
In addition to the Bill & Melinda Gates Foundation trust’s $35.7 billion portfolio, you can find Bill Gates stocks through his investment company, Cascade Investment, L.L.C. Both are managed by Cascade Asset Management Company. The trust has 23 holdings, while Cascade Investment L.L.C. has 14 positions.
Here are three of my top Bill Gates stock picks for 2023.
Cascade first invested in AutoNation in 2008, buying 9.9 million shares for around $82.8 million. Gates has added to his position and sold shares over the years, yet the current position is worth around $1.3 billion at today’s prices.
Year to date, AN stock is up more than 25%. Over the past five years, it has returned 193%, compared with 52% for the S&P 500.
On May 2, AutoNation announced it would sponsor the BWT Alpine F1 Team at this year’s Miami Grand Prix. It’s AutoNation’s first involvement with Formula One. However, it does sponsor three drivers in the NTT Indycar Series: Helio Castroneves, Simon Pagenaud and Kyle Kirkwood.
Although AutoNation reported a 5% year-over-year decrease in first-quarter revenue to $6.4 billion, it managed to generate adjusted earnings of $6.07 a share in earnings, 5% higher than a year ago and a company record. For comparison, in Q1 2008, just before Gates first invested in AutoNation, it earned $50.7 million, nearly six times less than the $288.7 earned in Q1 2023.
The Bill & Melinda Gates Foundation added to just two of its positions in the fourth quarter of 2022. One of those was Minnesota-based conglomerate Ecolab (NYSE:ECL), which offers “water, hygiene and infection prevention solutions and services.” The other was food-processing company Hormel (NYSE:HRL), for anyone who is interested.
The trust increased its position in ECL by 7%, or 351,617 shares, in the fourth quarter. It now holds 5.22 million shares, representing 2.13% of its portfolio. It first bought shares of Ecolab in Q2 2010. It’s paid an average of $63.25 a share. Today, the stock is selling for over $170 after a 19% year-to-date advance.
Ecolab is focused on solving some of the planet’s most significant issues. For example, according to the company, by 2050, the world is expected to add 30% more people and need 56% more food and 47% more energy. This, along with the freshwater deficit, should drive long-term demand for Ecolab’s products and services.
The company’s long-term financial objectives include growing sales by 6% to 8% annually, generating a 20% operating margin and increasing earnings per share by 15% yearly. In Q1 2023, the company reported a 7% increase in adjusted earnings, which came in at 88 cents per diluted share. And analysts are calling for full-year EPS growth of more than 11% on a nearly 8% increase in revenue.
Life sciences company Danaher (NYSE:DHR) was the only new position initiated by the Bill & Melinda Gates Foundation in Q4 2022. The trust purchased 373,000, which accounts for a stake of less than 1% and 0.28% of the trust’s assets.
Although DHR stock is down nearly 10% YTD, analysts like it. Of the 25 covering it, 19 rate it a “buy” or “overweight,” with an average target price of $281.65, 18% higher than where it’s currently trading. SVB Securities analyst Puneet Souda is even more bullish, initiating coverage of Danaher on May 1 with a “buy” rating and $300 target price. That implies upside of 25%.
This upgrade came after Danaher’s most recent earnings announcement. While the company delivered a Q1 revenue and earnings beat, sales in its biotechnology segment were weaker than expected, causing the company to reduce its full-year sales forecast. It now expects 2023 sales to grow in the mid-single-digits.
Yet, Souda is not concerned with the short-term weakness. Per Barron’s:
“We see Danaher as the most meaningful mega-cap long for 2023 to 2024 among the life science tools universe,” wrote the analyst, saying issues that pushed down the 2023 sales growth forecast, including inventory reductions, are “transient.”
If DHR is like Bill Gates’ other stock picks, it’s likely to prove to be an excellent long-term investment.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.