Bill Gates concentrates his bets: Canadian National Railway
Published: March 6th 2009
Source: GuruFocus

GuruFocus started to track new and yet very public individual – Bill Gates as our latest Investor Guru. The portfolio we track here is called Cascade Investment, which is the personal portfolio of Bill Gates. The portfolio is managed by Michael Larson.

As of December 31, 2008, Bill Gates has a very concentrated stock portfolio. More than half (53.7% ) of the asset is in Industrials stocks, 19.2% with Consumer Goods, 10.6% in consumer services, 10% in financial, 3.7% in utilities. The rest industry groups? Zill.

The $4.02 Billion of assets were invested in 20 stocks. The actual portfolio is even more concentrated than the number 20 suggests. The top Bill Gates Top Holdings: Canadian National Railway Company (CNI), Republic Services, Fomento Economico Mexicano, Berkshire Hathaway, Grupo Televisa S.A. and AutoNation, together they takes up more than 90% of the portfolio.
 

No. 1: Canadian National Railway Company (CNI), Percent: 31.85% - 34,809,544 Shares

In 4Q08, Bill Gates added 2.81% to his shares in CNI.

Bill Gates and Warren Buffett are goods friends. As a matter of fact, Warren Buffet donated a chunk of money to Bill & Melinda Gates Foundation. It turns out they compare notes on investments as well. Bill Gates bought into Canadian National Railway Company and Warren Buffett took a stake in Burlington Northern Santa Fe. There must be something special about the railways companies that attract two Investment Gurus.

Canadian National Railway Company operates the larger of Canada's two principal railroads. It owns the only coast-to-coast railroad network in North America. The company's rail network serves major ports in Canada and makes strategic connections to the United States through the Chicago gateway Detroit and other major cities.

Canadian National Railway Company Fully has a market cap of $15.36 billion; its shares were traded at around $30.67 with a P/E ratio of 8.9 and P/S ratio of 2.09. The dividend yield of Canadian National Railway Company Fully stocks is 2.8%. Canadian National Railway Company Fully had an annual average earning growth of 37.6% over the past 5 years.

CNI has declined from $56 it made late last year to around $30 now. The 10-Year Valuation in terms of P/E, P/E, P/B, is as following:

2. Republic Services Inc. (RSG), Weighting: 21.88% - 35,467,230 Shares

In 4Q08, Bill Gates added 1.7% to his shares in CNI.

Republic Services Inc. is a leading provider of services in the domestic non-hazardous solid waste industry. They provide non-hazardous solid waste collection services for commercial industrial municipal and residential customers through their collection companies. They also own or operate transfer stations and solid waste landfills.

Republic Services Inc. has a market cap of $4.34 billion; its shares were traded at around $18.74 with a P/E ratio of 12.5 and P/S ratio of 1.37. The dividend yield of Republic Services Inc. stocks is 3.19%. Republic Services Inc. had an annual average earning growth of 11.6% over the past 10 years. GuruFocus rated Republic Services Inc. the business predictability 5-star.

RSG stock price has dropped from $32 in late 2008 to around $17. The 10-Year Valuation in terms of P/E, P/E, P/B, is as following:


No. 3: Fomento Economico Mexicano S.A.B. de C.V (FMX), Weightings: 16.88% - 22,516,795 Shares

Bill Gates added 7.39% to his holdings in FMX in 4Q08.

Seeing the top holdings, one has to admit that Bill Gates, or Michael Larson, should we say, is totally pro-NAFTA (North America Free Trading Agreement). His top holding is a Canadian railways company, his third top holding is a Mexico company.

And it is not just any Mexico Company. FMX is Latin America's largest beverage company. Its products are exported to the United States, Canada, (using BNI and CNI railroads, I assume) and select countries in Europe, Asia, and Latin America. Its subsidiaries include the largest bottler for The Coca-Cola Co. in Latin America.

FMX has a market cap of $8.46 billion; its shares were traded at around $21 with a P/E ratio of 10.1 and P/S ratio of 0.63. The dividend yield of the stocks is 1.95%.

FMX stock price has dropped from $46 in late 2008 to around $19, more than 50%. The market is punishing everyone, even a beverage company.

4. Berkshire Hathaway Inc. (BRK-A), Weightings: 9.74% - 4,050 Shares

Of course Bill Gates needs to own some Berkshire Hathaway stocks. What’s a friend for? especially when you can afford it. This is Bill Gates’s personal account we are talking about, not Bill & Melinda Gates foundation. Bill Gates actually had to pay for the shares.

We know what Berkshire Hathaway does, it only have 67 non-insurance businesses and numerous insurance businesses. So it is straight forward. We are familiar with the man at the top of the company in particular, let’s skip the introduction.

As of today, Berkshire shares were traded at around $72400. It dropped from over $140,000 last year, so it is approximately 50% off. You have to go back to 2003 to find this price levels. Aren’t they are all this cheap? Or Cheaper? S&P 500 Index closed today at level not seen since 1996, so it still pays to invest in Berkshire in that regard.

5. Grupo Televisa S.A. Global Depositary (TV), weighting: 7.5% - 20,180,400 shares

Grupo Televisa S.A is the largest media company in the Spanish-speaking world and a major player in the international entertainment business. It is traded at around $11 per share, with a P/E of 9.2, P/S of 1.6, and P/B of 1.8. Its stock price also fell through the roof. The 10-Year Valuation in terms of P/E, P/E, P/B, is as following:


6. AutoNation (AN), Weighting 2.78% - 11,315,688 shares

In 4Q08, Bill Gates more than doubled his holding in Automation.

AutoNation Inc. is the one of the largest automotive retailers in the United States. Its share price fell from $22 to about $9.5 per share, with a P/E of 9.1, P/S of 0.12, and P/B of 0.12. The 10-Year Valuation in terms of P/E, P/E, P/B, is as following:

In conclusion, Bill Gates owned a very concentrated portfolio as of 4Q08, with more than 90% of the assets in just six(6) stocks. Without exception, all six stocks have declined substantially, together with the general market. All six stocks are either at historical low or close to it in terms of P/E, P/S, and P/B ratios.

It will be interesting to see next quarter when Bill Gate reports his holdings. GuruFocus will be monitoring the changes until then.

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