Gates’ foundation trust holds stakes in several blue chips, but these smaller positions could be smart picks for growth investors looking for hidden gems.
Bill Gates is one of the most familiar names on the Forbes list of billionaires. His claim to fame (and fortune) was at Microsoft, where he led the company from its founding in 1975 until 2006, when he transitioned away from full-time work at the company to spend more time on his foundation.
The Bill and Melinda Gates Foundation was formed to help people in countries that struggle with disease and poverty live a more healthy and productive life. Since 2000, the foundation has spent more than $53 billion toward this goal.
At the end of 2023, the foundation trust, which manages the foundation’s endowment assets, held $42 billion worth of stocks, including Warren Buffett’s gift of Berkshire Hathaway shares. The trust holds positions in several industry leaders, including Microsoft, Walmart, and FedEx. These are the types of quality companies you would expect a responsible foundation to invest in to preserve and grow assets in a relatively low-risk manner.
However, the trust is not shy to take a swing at selective growth stocks with enormous upside potential. At the end of the year, the trust held a $149 million stake in Korea’s leading e-commerce store Coupang (CPNG 1.31%), and it held $13 million in fast-growing sportswear brand On Holding (ONON 4.63%). Let’s dig deeper to find out why a risk-averse foundation likes these opportunities.
Coupang
If you’re trying to identify the safest growth stocks to buy to fuel your long-term returns, e-commerce is a ripe field to look for ideas. Online shopping has been gradually increasing its share of total retail spending over the last 20 years, but it’s still in the early innings, and this is evident looking at Coupang’s growth history.
Coupang is leading a Korean e-commerce market that is projected to grow 4% per year to $563 billion by 2027, according to Euromonitor. The company is rapidly gaining share of this growing market. Over the last five years, Coupang’s annual revenue exploded from just over $4 billion to $24 billion. It reported year-over-year revenue growth of 23% in 2023’s fourth quarter.
The Gates Foundation Trust held more than 9 million shares of the stock at the end of 2023 and has not a share since first initiating a position in the first quarter of 2021.
Consistent with the conservative investing approach of the trust, Coupang’s management is responsibly growing the business. Even while investing to expand selection and fulfillment centers to meet demand, the company reported an adjusted profit of $465 million in 2023. More profitable growth is in store, given management’s high-return threshold for funding new growth initiatives within the business.
Another reason to like the stock is the value under the share price. On a price-to-sales basis, Coupang is trading at less than 2 times its trailing-12-month revenue, which is a fair entry point to invest in a leading e-commerce business with above-average growth prospects.
On Holding
The foundation trust held 500,000 shares of On Holding at the end of 2023. Identifying consumer brands early in their growth path can be one of the most rewarding investment strategies. On’s recent growth points to a global sportswear brand in the making.
On is primarily known for running shoes, but also designs apparel and shoes for travel, tennis, training, hiking, and lifestyle. This Switzerland-based sportswear brand is resonating worldwide, with revenue increasing 55% in 2023 on a constant-currency basis.
On is tapping into growing demand for alternatives to the bigger sneaker brands like Nike and Adidas, which have struggled to grow revenue above the single-digit range in recent years. On is gaining tremendous share of a market valued at $135 billion across athletic footwear and sneakers, according to Statista.
With about $2 billion in annual revenue, On has a long runway of growth. Shoes make up 95% of its revenue, but management is investing to expand into apparel, where revenue grew 45% last year.
It’s worth noting that athletic wear brands offer lower risk than the average apparel company, which can be susceptible to swings in fashion preferences. This likely explains why the trust decided to buy shares, where it has held a stake since Q3 2021. Top brands like Nike were able to maintain above-average growth over decades, and On Holding might be next in line.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Coupang, FedEx, Microsoft, Nike, and Walmart. The Motley Fool recommends On Holding and recommends the following options: long January 2025 $47.50 calls on Nike, long January 2026 $395 calls on Microsoft, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.