During an event in 2018, Bill Gates was asked if he thinks that we might see a new financial crisis in the near future. His answer was:
“Yes. It is hard to say when, but this is a certainty.”
Hello everyone and welcome back to Investing with Antoaneta. In today’s blog, I want to talk to you about Bill Gates and the recent changes to his portfolio. We’ll take a look at what he did, which are his top positions right now and we’ll try to figure out why he did what he did.
Before we begin I just want to plug in a quick reminder to like and share this blog if you enjoy my content. It really helps the platform grow! Check out my other blogs such as, “Best Time To Invest” and my virtual masterclass for Wellness Business Idea.
With his net worth of over 127 billion dollars, Bill Gates is one of the wealthiest people in the world. And, yes I am well aware that he owes a big portion of that to the success of Microsoft. But he’s also very big on investing. Just like most other successful people out there, he uses his money to make more money. He might not be as popular as Warren Buffett when it comes to investing alone, but I believe that there’s a lot that we can learn by looking at his moves on the Stock Market.
And especially recently, because he’s been making some very interesting choices. On his recent 13f filings, he sold and reduced 11 pretty major positions and only added 1.
Bill Gates reduced and sold:
- 100% of his Alibaba position
- 100% of Boston Properties
- 100% of Uber
- 50% of Google
- 50% Amazon
- 50% of Apple
- 27% of Liberty Group
- 13.6% of Berkshire Hathaway
And 0.86% of Canadian National Railway
The only position he added to was 40% to Schrödinger
With these changes, his top ten positions (which make up 95% of his entire portfolio) are:
- Berkshire Hathaway
- Waste Management
- Canadian National Railway
- Crown Castle
Now, if you’ve been following my platform for some time, you’ve heard me say that selling 100% of a position isn’t something that you want to do unless things are not looking good for the future of the stock, or unless you need some cash for a better investment. Actually, I talked about this very recently in my blog and if you missed it I highly recommend checking it out.
I rarely sell out of a position unless I have a very good reason and I’m nowhere near as big of an investor as Bill Gates.
So, when someone of his caliber does something like this, people start looking for reasons.
Just like Buffett, Bill Gates is a value investor. And if we examine this from a value perspective, we will see that all of his sales were high in price.
- Apple up 356% over the last 5 years, with a P/E of 33
- Google, up 176%, 33 P/E
- Amazon, up 420%, 72 P/E
And since Bill Gates isn’t someone who would ever need to sell a position due to running out of cash, there has to be something else that’s going on. Something that he’s noticed but the rest of the market hasn’t caught up to just yet.
The most logical conclusion here would be that he, just like so many other investors out there, is worried about the future of the market. Or, in other words, he’s expecting a crash.
And, well, between the massive influx of new people on the Stock Market (looking for financial independence), the restrictions preventing people from spending their money the way they want to (which makes them more inclined to invest) and so many stocks going up in such a big way, it makes sense.
Bill Gates doesn’t like this situation at all. He says that all of those new people who just rush in and blindly pour money into positions they don’t understand aren’t even investing. They’re gambling. To him, it looks like things are headed in the same direction they did in the 1930s, with the massive crash that happened back then.
It all started with the roaring twenties and the big hype around the Market. Back then, things also didn’t look “bad” for the Stock Market, at least from the perspective of the average newcomer. Quite the opposite actually – people allowed themselves to be convinced that the market could only go in one direction – up. And once the fear of missing out got to them, everyone started pouring their money into stocks.
Then, the 30s came around and brought one of the biggest and most devastating market crashes in history.
In light of all this, Bill Gates’ choice to trim so many of his positions makes a lot of sense.
But he isn’t just selling, of course. He’s also buying, even if it was just one position. And it’s actually a very interesting company.
Schrödinger is a material science company, based in NYC. They develop software for computational chemistry. Or, in other words, they use computer simulations to develop medicine and materials.
On the financial front, Schrödinger might not be a major player just yet, but things are looking promising, especially for a company that is reinventing everything into R&D.
A share of Schrödinger will set you back about 76 dollars
They are currently sitting on a market cap of 5.34 billion dollars and they’ve demonstrated consistent revenue growth over the last couple of years. Earnings are going down right now, but as I pointed out, that’s to be expected, since they reinvest heavily into R&D.
Once again, this is just the type of move you could expect from an investor like Bill Gates, especially with all of his involvement in medicine and healthcare. As I always say, the companies that you understand well are the best investment targets. The better your understanding, the more accurately you can gauge the long-term potential of the business.
Now, unlike Bill Gates, I’m not big into healthcare, so I can’t really make a solid guess about the future of Schrödinger, but I believe that it’s safe to assume he knows what he is doing.
And before we wrap things up for today I want to take a quick look at the bigger picture.
The market cap to GDP ratios right now is really, really high and the S&P 500 P/E ratio (about 40) is almost 3 times higher than the standard market average of 15.
Warren Buffett has pointed out that market cap to GDP is “probably the best single measure to where valuations stand at any given moment” and currently, we’re looking at a ratio that’s higher than what we had during the internet bubble before the 2008 crisis.
So, both of these metrics support the prediction that Bill Gates made back in 2018 that we could see a big market crisis in the coming years.
- Bill Gates believes that the world is guaranteed a major financial crisis in the near future
- The market trends support his prediction
- He disapproves of the way in which most new investors are approaching the stock market right now
- He has been pulling out of a lot of big positions
- He is betting on safe and reliable companies that will deliver a lot of value in the long term
Does this mean that it’s time to panic? Of course not. But it is definitely a time to be careful with your investments and keep an eye out for what happens next.
And if you’re looking for ways to up your investing game, our Private Investing Group is a great place to start. We’ve got a ton of exclusive content, a live chat, and a couple of courses that you won’t find anywhere else.
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Thank you all for being with me here today and until next time!
Recommended books for further reading:
- A Beginner’s Guide to the Stock Market: Everything You Need to Start Making Money Today
- Shares Made Simple: A beginner’s guide to the stock market
- How to Make Money in Stocks: A Winning System In Good Times And Bad
- The Five Rules Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market
- The Financial Times Guide to Investing: The Definitive Companion to Investment and the Financial Markets: The Definitive Companion to Investment and the Financial Markets
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