We all know who Bill Gates is. He's one of the richest men in the world with a net worth of around 127 billion dollars. He did this through creating his own company Microsoft, but he also did it through very smart investing.
Lately Gates is making some very interesting investment moves. His recent 13 filings he sold and reduced 11 stock positions and he bought just one.
Let's take a look at some of these:
1. Uber the worldwide ride-hailing company - he sold a hundred percent of his position.
2. Boston properties - he did the same thing he reduced it by a hundred percent, selling 1.1 million shares.
3. Alibaba - one of China's biggest companies here sold in his recent 13th filings a hundred percent of his position.
4. Google or Alphabet (same thing) he reduced by 50%.
5. Amazon - he sold all his shares.
6. Apple – even it was not immune to the wrath of Gates investment decisions – 50% gone.
These are big moves that Gates is making. Normally when an investor sells some of his position, it's normally a couple of percent. If it's 5%, it is usually a big deal.
And Bill Gates, he's selling 100% out of his positions like Uber and Alibaba, and 50% out of big stocks like Amazon, Apple, and Google these are big moves.
Some of his other moves include
7. Liberty group - the communications company, it was reduced by 25%
8. Great Berkshire Hathaway - was reduced by 10.6%
9. Canadian national railway - the only small sale of 0.86%
And if we take a look at all of the stocks that he bought in the first quarter of 2021 it was just one a stock called Schrödinger a healthcare stock.
And what the investors really want to know is why has Gates made such big sales in these massive companies.
One of Gates’s patterns is that with a lot of stocks he sold – he did it when they're very high in price which a lot of investors avoid.
Uber, that's currently selling for 56 dollars a share, market cap is over 100 billion and it's not even generating any profits.
Amazon price wise has gone up more than 400% over the past five years. It's got a p/e of 72. That's considered very high and not good.
Apple is up over 350%, p/e ratio is 33.
Google or Alphabet is up 170% with the same p/e ratio as Apple of 33.
These stocks that Bill Gates is rushing out of, you'd have to say, he thinks they're overvalued. It's not like he's selling them because he's desperate for cash, his net worth is over $127 billion dollars.
Most probably Gates is worried about a market crash.
if you look at a lot of stocks in the market their prices are up to crazy levels, and we’re sure Bill
Gates and his investment manager Michael Larsen have been closely looking at this market.
As per the latest report they have decided to dramatically trim or exit some of their positions.
We've seen a lot of crazy behavior in the market, people just seem to have so much spare money on them and what do they do with it - they put it into stocks
Bill gates is not a fan of this uneducated investing style he linked it to a casino. He said ‘we don't think of the stock market as just performing a casino-like role, we have restrictions on gambling activities’
The current situation reminds us of the 1930s, to some degree so with all this crazy behavior that was seen in the market, Gate says it reminds him of the 1930s, something which Ray Dalio has also pointed out before
What happened back then was you had the roaring twenties, when everyone was putting their leftover cash into the market, because they thought it could only go one way and that's up but then in the late 20s and 30s, we saw one of the biggest market crashes that the world has ever seen.
That’s a big reason why Gates has decided to trim his positions.
So, look at the only position that Gates is buying - Schrödinger the drug discovery and material science company.
Schrödinger - they use computer simulation to design different medicines and drugs to help cure diseases. They also use computer stimulation to design different types of materials too.
And Bill Gates is someone who is well educated in healthcare and he’s invested in a relatively small company, five billion dollars in market cap.
They sell for 76 dollars a share, and revenue wise they're doing pretty good as well. Their revenue has been growing steadily over the past couple of years, as they look to discover new drugs.
Schrödinger earnings are decreasing and that's just because they are reinvesting every single dollar.
Back in 2018 Bill Gates was asked if in the near future there will be another financial crisis, similar to the 2008? And Gate said “yes, it is hard to say when, but this is a certainty.”
With the amount of stocks that he has sold recently there is a lot of people questioning if that when is 2021?
Let's look at some statistics of the overall market in 2021.
1. The market cap to GDP ratio. Warren Buffett said on it that it's probably the best single measure of where valuation stand at.
And it is very high right now, it's eighty percent higher than the zero percent equal fair value market range, and it's miles above what it was in the 2008 financial crisis
It's even higher than what it was in the 2000 internet bubble.
And we all know what happened to stocks after that. This indicator says prices are high and is very worrying sign.
2. Looking at the market p/e ratio it tells a similar story. It's currently sitting at the 40 mark now. This is near the 2000 technology bubble but not quite as high as what things were in the 2008 housing bubble.
Nevertheless, a market p/e ratio of 40 is high if you consider the average that it has been throughout history - that's 15. So, it's more than double that, and therefore Bill Gates portfolio right now is conservative.
His top 10 stocks that makes up 95 percent of his overall portfolio are value-oriented safe place
His number one position even though he sold some is still Berkshire Hathaway.
Next it goes Waste management, Caterpillar (conservative), Canadian national railway (conservative), Walmart, Ecolab, Crown castle, Fedex, UPS - all conservative.
And the last one is Schrödinger. Apart from Schrödinger which is his 10th largest position that is a very safe portfolio.
When looking at Bill Gates’s stock positions - he's got a very guarded and cautious portfolio for the current market conditions and we should keep a close eye on the upcoming future as it might not be so bright for the stock market.