When investors think of Bill Gates stocks, they inevitably come up with Microsoft (NASDAQ:MSFT), the software company he co-founded with Paul Allen in 1975 in Albuquerque.
However, as Gates has spent less time around Microsoft’s business, the billionaire has significantly diversified his investment portfolio.
Gates stepped down as CEO of Microsoft in January 2000. At the time, his 731.7 million shares in the company represented a 13.7% ownership stake. Today, his stake is down to 1.38%, according to FactSet.
As of June 30, the Bill and Melinda Gates Foundation Trust had $42.06 billion in assets listed in its 13F. The Bill and Melinda Gates Foundation 13-F had $125.6 million in assets.
To ensure that I spread things around, I’ll pick two stocks to buy for billionaire-like returns from the trust and a third from the much smaller foundation holdings — some of which Gates has held for years through his philanthropic entities.
Schrodinger (SDGR)
I considered selecting some obvious names that Gates has owned for years, like Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B). The trust has held Berkshire stock since 2006.
However, where would the fun be in that?
As a result, my first pick is Schrodinger (NASDAQ:SDGR), a New York-based healthcare technology company that helps biopharmaceutical and industrial companies, academic institutions and government laboratories with the development of innovative new drugs and materials.
It is the trust’s 11th-largest position, accounting for 0.83% of its portfolio. The trust’s holdings account for 11.2% of Schrodinger’s outstanding shares, making it the largest shareholder.
Interestingly, Cathie Wood’s ARK Investment Management is the fourth-largest shareholder, with a 6.2% stake in the company.
SDGR shares hit a 52-week high of $59.24 in July. However, it was short-lived. The company announced Q2 2023 results in early August that included a 9% decline in revenue. Schrodinger said that its 2023 revenue for its drug discovery segment would be 25% lower than its previous estimate of $80 million.
Its shares fell 23% on the news. They’ve been falling ever since.
The good news is that it uses artificial intelligence (AI) for the drug development process, so there’s no question its fortunes could turn around in a hurry.
Of the nine analysts covering SDG, there are six that rate it a Buy with three Holds and no Sells. Its price target is $52, more than double where it currently trades.
Mexico Fund (MXF)
The trust’s 8th-largest holding is Coca-Cola Femsa (NYSE:KOF). Its investment in the bottler of Coca-Cola (NYSE:KO) for Mexico and other parts of Latin America accounts for 1.23% of the $42 billion in assets. It has been invested in the company since 2005.
However, I decided to go another way, opting for the Mexico Fund (NYSE:MXF), a closed-end fund that invests in stocks trading on the Mexican Stock Exchange. The holding represents just 0.03% of the portfolio.
The fund’s largest holding is Fomento Económico Mexicano (NYSE:FMX), with a weighting of 12.05% of its $279 million portfolio. Femsa owns 47.2% of Coca-Cola Femsa but controls the bottler with 56% of the votes.
MXF is an excellent way to own some of Mexico’s largest and most successful companies without buying into individual stocks. Over the past three years, it’s up 21.4% annually.
As of Sept. 30, it traded at a 19.9% discount to its net asset value per share of $20.56. At the end of 2022, the discount was 16.8%, 310 basis points lower. The higher the discount, the better the buy.
Vir Biotechnology (VIR)
Vir Biotechnology (NASDAQ:VIR) is the largest holding of the foundation’s nine positions as of June 30. All but one are healthcare stocks, which makes sense given the foundation works to eradicate some of the world’s deadliest diseases.
The foundation’s position in VIR accounts for 30.4% of its $125.6 million assets. It first invested in the biotechnology company in 2020.
Vir’s shares are down 67% in 2023. Much of the damage was inflicted in July when its shares fell 45% to a three-year low after the company reported its experimental antibody therapy for preventing a type of flu failed in its mid-stage clinical trials.
The company’s sotrovimab antibody therapy, developed in partnership with GSK (NYSE:GSK), is sold under the Xevudy brand name.
In the three months ended June 30, its collaboration revenue was -$13.8 million, 75% lower than in Q2 2022. The number was negative because it was still scaling the business with GSK. Expenses in future quarters may be less than the revenue generated by Xevudy.
Like all biotech stocks, the risks are immense, but so are the payoffs.
On the date of publication, Will Ashworth did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.