Does Billionaire Bill Gates Think Berkshire Hathaway Stock Is a Buy?

Bill Gates acquired his billions by co-founding Microsoft. But most of his money today is tied up in his charitable foundation, whose holdings are available for the public to see.

For years, the foundation has owned shares of Warren Buffett’s holding company Berkshire Hathaway (BRK.A) (BRK.B 0.55%). But you might be surprised by how heavily invested the foundation is in this one iconic business.

Bill Gates is betting billions on Berkshire Hathaway

Bill Gates is no newcomer to the investing wisdom of Warren Buffett. The two have been close friends for decades. In 1995, they visited a McDonald’s together, and Gates recounted the experience years later with glee.

“Remember the laugh we had when we traveled together to Hong Kong and decided to get lunch at McDonald‘s,” he recalled with Buffett in 2017. “You offered to pay, dug into your pocket, and pulled out coupons! It reminded us how much you value a good deal.”

So you can say the respect that Gates has for Buffett runs very deep, built over decades and shared experiences. And as the quote tellingly reveals, it wasn’t lost on Gates how adamant Buffett is on scoring a good deal.

That might explain why the Bill & Melinda Gates Foundation has Berkshire as its second biggest holding, behind only Microsoft. As of the latest reporting period, the foundation owns 24.6 million shares of Berkshire worth around $10 billion, making up 21% of its total portfolio.

Last quarter, the foundation bought even more Berkshire stock, adding approximately 7.3 million shares. After that purchase, the Gates foundation now owns more than 1% of Berkshire’s total outstanding stock.

Bill Gates is clearly a fan of Berkshire. And you should be, too. Right now, there are two major reasons why you should take a closer look at Berkshire as an investment.

2 reasons to join Gates and Buffett by buying Berkshire stock

There are two reasons why I think the Gates foundation loaded up on 7.3 million additional Berkshire shares last quarter. If you find yourself in agreement, it may be time to add more of the company to your own portfolio.

First, markets are undoubtedly expensive. No one can predict the short-term direction of the market, but the S&P 500 trading for over 30 times earnings certainly has many expert investors worried, Buffett included.

Berkshire currently has a record cash pile, and Buffett doesn’t seem too overly concerned about putting it to work. By purchasing shares in Berkshire, you’re not only buying a great business with great managers, but you’re also improving your ability to make money if markets fall.

With a cash position above $200 billion, Buffett is in great shape to add huge positions at a discount should a bear market arrive. Berkshire stock would likely still experience short-term pain in this situation, but the company is well prepared to position its portfolio for the next decade if a crash arrives.

The second reason to by Berkshire stock right now is that, even if markets still head higher, the company has proved to be a reliable bet. Berkshire’s market cap is now around $1 trillion, and much of that value is tied up in low-interest cash. And yet over the last three years, Berkshire’s return has been nearly double that of the S&P 500.

The company’s strategy of diversified, decentralized investing with a portfolio spanning the entire globe and nearly every industry gives it the ability to invest throughout every cycle. Its insurance businesses, for example, produce investable excess cash even during bear markets.

And Buffett and his team have an exemplary record of putting that capital to good use, even when the odds are stacked against it due to Berkshire’s sheer size.

There’s a lot to love about Berkshire, whether markets head higher or lower in the months and years to come. If you’re a patient, long-term investor like Gates, now is a great time to add more of the company’s shares to your portfolio.