Speaker 1: So 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. Now, he did this through creating his own company, Microsoft, but he also did it through very smart investing.
Now, I don’t know if you guys have been paying attention to the investing moves that Gates has been making lately, but what can I say on them? They’re very interesting, to say the least. So in his recent 13 filings, he sold and reduced 11 stock positions and he bought just one. OK, so let’s take a look at this. Uber, the world ride hailing company. He sold 100 percent of his position, Boston Properties. He did the same thing. He reduced that by 100 percent, selling one point one million shares. Alibaba, one of China’s biggest companies, he has sold and is recently net filings, 100 percent of his position going up a bit. These three stocks, he’s reduced by 50 percent since Google or Alphabet. Same thing. He sold all of his shares in Amazon. Jeff Bezos won’t be too happy with us. One fifty percent of the Bill and Melinda Gates trust position was reduced. Even the great Apple was not immune to the wrath of Gates investment decisions, 50 percent gone. So these are big moves that Gates is making. Normally, when an investor sells some of his position as normally a couple of percent, if it’s five percent, people are normally like, whoa, that’s a big deal. That’s a big sale. But Bill Gates, he’s selling 100 percent out of his positions like Uber and Alibaba and 50 percent out of big stocks like Amazon, Apple and Google. These are big moves.
Do not make any mistake about that. Some of his smaller moves, which are still actually quite big, include Liberty Group, the communications company that was reduced by a whole quarter. The greats of Berkshire Hathaway was reduced by ten point six percent. Not sure how Buffett feels about that one. In the last position that was sold was Canadian National Railway, the only small scale of zero point eighty six percents. And if we take a look at all of the stocks that he bought in the most recent quarter, that was just one, a stock called Schrodinger, a health care stock, which we’ll talk about a bit later on. So I’ll repeat that. Eleven stock sales and one stock buy. And when I say stock sales, not just small sales, not just small reductions, 100 percent and 50 percent type reductions. And what we really want to know as investors is why? Why has Gates made such big sales in these massive companies? Now, Gates is a little bit like Warren Buffett. They don’t like to talk too much about their personal investments. The only reason we know about his buys and sales is because he legally has to disclose them. But Gates, he’s a value investor, just like Buffett, that he learned his investing skills from when he was a lot younger. And the pattern that you’ll notice with a lot of stocks that he sold is they’re very high in price, which a lot of investors avoid. UBA that’s currently selling for fifty six dollars a share market cap, is over 100 hundred billion and it’s not even generating any profits. Amazon, price wise, has gone up more than 400 percent over the past five years. It’s got a PE of seventy, so that’s considered very high. Apple is up over three hundred and fifty percent. P e ratio is thirty three. Google or Alphabet. The proper name is up 170 percent with the same PE ratio as Apple of thirty three. So 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. I mean his net worth is over one hundred twenty seven billion dollars. I’m sure he’s got his fair share of cash on the sidelines. But I think 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.
I’m sure Bill Gates and his investment manager, Michael Larson, have been closely looking at this market. And as per the latest reports, they have decided to dramatically trim or exits some of their positions. It’s just as you all know, we’ve seen a lot of crazy behavior in the market. People just seem to have so much spend 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 likened it to a casino. He said, we don’t think of the stock market as just performing a. Casino like row, we have restrictions on gambling activities, so how do you take social media from taxing stocks? This reminds us of the 1930s to some degree. So with all of this crazy behavior that was seen in the market, Gates says it reminds him of the 1930s, something which Ray Dalio has also pointed out before. And what happened then was you had the roaring 20s 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, 30s, we saw one of the biggest market crashes that the world has ever seen. I think this is a big reason why Gates has decided to trim his positions. Now, let’s look at the one position, the only position that Gates is buying Schroedinger, the drug discovery and material science company shorting. Basically, what they do is they use computer simulation to design different medicines and drugs to help cure diseases. They also use computer simulation to design different types of materials as well. Now, I’m not a drug or health care expert. I’m not going to sit here and pretend that I am. But I’ll tell you, someone who is well educated and health care, and that’s Bill Gates. I mean, he’s been so involved in the pandemic and the vaccines and just health care in general. And I find it very interesting that the stock, Schrodinger is the one stock that he decided to invest in. I mean, it is a smart idea for a company. Computers do so much for society these days. Why not use them to discover new drugs? Perhaps it’s the future of health care. Since I’m not an expert, I can’t say for sure. What we can say is that Bill Gates likes the stock. Taking a look here. It’s a small company, five billion dollars, a market cap. And yes, in this day and age that is small and they sell for seventy six dollars a share right now. Bill Gates, he would have bought around that 70, 80, 90 dollar mark. And revenue wise, they’re doing pretty good as well.
Revenue has been growing steadily over the past couple of years as they look to discover new drugs. Earnings, as you can see, is decreasing. And that’s just because they’re reinvesting every single dollar in R and D. With Bill Gates being so in-depth and thoroughly researched in the health care sector, perhaps this is a stock to look deeper into adding to our own portfolio. But the major storyline when we look at his buys and sells is that he’s selling much more than he’s buying 11 to one. And I want to bring your attention to what Bill Gates said a couple of years ago. In twenty eighteen, he got asked in the near future, will we have another financial crisis similar to the 2008 one? Gates said, yes, it is hard to say when, but this is a certainty, a short and blunt answer. With the amount of stocks that he has sold recently, there is a lot of people questioning if that when is twenty twenty one. Because let’s look at some statistics of the overall market in twenty twenty one. First, the market cap to GDP ratio. Warren Buffett, he said on this measure that it’s probably the best single measure of where valuations stand at any given moment. If we take a look here, it is very high right now. It’s actually 80 percent higher than the zero percent equal fair value market range. And the thing that really stood out to me was that first is that it’s Mauro’s above what it was in the 2008 financial crisis, but it’s even higher than what it was in the 2000 Internet bubble. And we all know what happens to stocks after that’s this indicator says prices are high. The one excuse that you might be able to reason with is that GDP has been down irregularly over the past year due to the pandemic and it may shoot up compared to last year. Nevertheless, this indicator is still a worrying sign. Looking at the market PE 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 PE 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 maybe this is why Bill Gates portfolio right now is conservative. His top 10 stocks. That makes up NOI. Five percent of his overall portfolio are value oriented, safe plays, his number one position, even though he sold some, is still Berkshire Hathaway. Next, it goes Waste Management’s Caterpillar, conservative Canadian National Railway, conservative, Wal-Mart, Ecolab, Crown Castle, FedEx, UPS, all conservative. And the last one is Schroedinger. So apart from Schrodinger, which is his 10th largest position now, that is a very safe portfolio. We don’t know how much cash that he has on the sidelines. Unfortunately, he doesn’t have to disclose that. But we can say when looking at a stock positions, he’s got to be very guarded and cautious portfolio for these market conditions.
When someone sells 11 stocks and only buys one, especially when it’s a billionaire investor like Bill Gates who knows so much about the market and this new world that we’re in, I think he’s someone that we want to keep a close eye on in the up coming future.