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When two of the world’s most legendary investors and richest men own the same stocks, it’s worth taking notice. Bill Gates and Warren Buffett go way back as close friends and partners in philanthropy. But while their vast fortunes share common origins in tech and Berkshire Hathaway, their stock portfolios have little overlap — with just three shared holdings.
What wisdom can average investors glean from the only stocks that both Gates and Buffett own significant stakes in — Kraft Heinz, United Parcel Service, and Berkshire Hathaway itself? As we’ll explore, these picks offer lessons on the timeless value of unflashy consumer staples brands, essential businesses, cyclical yet defensive stocks, the power of dividends, and having a mentor.
Packaged food giant Kraft Heinz is the number one stock both billionaires own. Buffett’s Berkshire Hathaway holds a massive 27% stake worth over $10 billion. The Bill and Melinda Gates Foundation owns around $85 million of Kraft Heinz shares.
Why does the maker of Oscar Mayer, Philadelphia, Maxwell House and Velveeta appeal to two of history’s greatest investors? As a consumer staple, demand remains steady through good times and bad. People always need to eat. The plethora of iconic brands also command incredible pricing power that keeps up with inflation.
But Kraft Heinz also shows even legendary investors aren’t perfect. While organic sales grew over the past couple years as people ate at home more, volume has now declined as shoppers balk at steep price hikes. Kraft Heinz may face trouble if it keeps raising prices and consumers switch to cheaper store brands.
This highlights the need to spot changing trends early before they significantly impact results. It’s possible Buffett and Gates underestimated how far Kraft Heinz could push cost increases before shopper behavior changed.
United Parcel Service
Both Berkshire and the Gates Foundation are also long-term holders of United Parcel Service, or UPS. The global delivery giant benefits from the same durable competitive advantages that attracted the value investors to Kraft Heinz: scale, branding, and demand stability.
Over decades, UPS has built one of the world’s largest logistics networks that serves as an essential backbone of the global economy. Rival FedEx has chased UPS in scale ever since starting in 1971. The huge infrastructure is prohibitive for new entrants, protecting UPS’s pricing power.
Its brand is synonymous with reliable delivery and gives customers confidence. Plus, UPS sees consistent baseline demand as long as businesses are operating and consumers are spending. Temporary economic slowdowns don’t derail the long-term need for shipping capacity.
UPS also shows Buffett and Gates favor companies that reward shareholders. UPS yields a dividend aristocrat-like 4.2% and has raised its payout annually for over a decade, appealing to the billionaires’ love of recurring income.
Finally, it’s no surprise that Berkshire Hathaway itself is a shared holding given Buffett built it into his investing vehicle and Gates has been a business partner and done philanthropy with him for decades.
Berkshire stock has minted millionaires for decades thanks to Buffett’s brilliance in value investing and capital allocation. Its diversified collection of businesses generates huge cash flow to deploy in investments and endure any market turbulence.
Like with UPS, Berkshire’s collection of insurance, utility, railroad, manufacturing, retailer and other cyclical yet defensive companies benefit from the economy’s steady long-term expansion. Periods of weakness are shorter and milder than expansions over time.
Berkshire also takes Buffett and Gates’ shared love of dividends to an extreme, collecting over $6 billion in dividend income annually. The ever-growing cash pile lets Buffett make huge opportunistic investments.
Owning Berkshire stock lets small investors benefit from the greatest capital allocator alive riding shotgun on their investing. As Gates has often said, having Warren Buffett as a mentor has been priceless to his own investing success and philanthropy.
The exclusive trio of stocks providing overlap between two of history’s most elite investors offer everyday investors these valuable lessons:
- Seek unflashy but dominant consumer staple companies. Their brands and products will be needed in good times and bad.
- Focus on businesses providing essential services or with economies of scale. Strong competitive advantages protect pricing power.
- Favor cyclical companies with the financial strength to weather downturns. The economy expands more than it contracts over time.
- Regular dividends provide defense in shaky markets and recurring income. Prioritize companies with long payout growth histories.
- Having investing mentors, even if just by studying their wisdom, can sharpen your own strategy and avoid mistakes.
While no companies are flawless investments, analyzing why business legends like Buffett and Gates invest in certain stocks can make us better investors too. Their shared holdings offer models of strong brands, pricing power, defensive moats, essentiality and income generation.
Q: How many stocks do both Bill Gates and Warren Buffett own?
A: Out of their extensive portfolios, Gates and Buffett only own 3 of the same stocks — Kraft Heinz, United Parcel Service and Berkshire Hathaway.
Q: Why do Buffett and Gates invest in the same stocks?
A: They favor many of the same proven investing principles like strong brands, pricing power, competitiveness, cyclicality and dividends. Their shared philanthropic work also means sharing some investment wisdom.
Q: What industries are their shared holdings in?
A: Kraft Heinz is in packaged consumer staples, UPS in delivery and logistics, and Berkshire Hathaway a diversified conglomerate. This shows their shared belief in unflashy, defensive and essential businesses.
Q: Should regular investors copy the stocks Gates and Buffett own?
A: Their holdings can serve as a model for finding dominant essential businesses with competitive advantages. But you still need to do your own due diligence before investing in any stock.