In today's information age, knowledge is at our fingertips. With a smartphone and an internet connection, we can access vast amounts of data to form informed opinions on various topics, one being global wealth. A prominent figure in this realm is Bill Gates (Trades, Portfolio).
The founder of Microsoft Corp. (MSFT, Financial), Gates has been a mainstay on the global rich list for several years. He was the first person to amass $100 billion in wealth during the dotcom era, thanks to a surge in Microsoft's shares. Since 1987, he has been a prominent figure on Forbes' prestigious billionaire list.
In 1995, he solidified his position as the world's wealthiest individual, further cementing his remarkable success in the business world. He maintained this position until 2008, when Mexican business tycoon Carlos Slim briefly surpassed him. Despite losing and regaining the title multiple times, Gates' wealth has been notable, especially after donating $55 billion to the Gates Foundation. For him, being the world's richest person is as commonplace as filing taxes is for others.
This backdrop sets the stage for examining stocks in the equity portfolio of his foundation trust. While Gates has been known for his philanthropy, an outside team of portfolio managers are in charge of the Bill and Melinda Gates Foundation's portfolio. With a handful of its current investments approaching 52-week lows, this presents an interesting opportunity for investors to assess the potential value and risks associated with these stocks.
Crown Castle International
Crown Castle Inc. (CCI, Financial), one of the largest U.S.-focused cell tower real estate investment trusts, trades 1.55% above its 52-week low. It also has a usiness predictability rank of five out of five stars.
The company recently posted its second-quarter financial results, with funds from operations of $2.05 beating expectations by 4 cents and revenue of $1.87 billion topping estimates by $10 million. Despite this, Crown Castle faces two significant headwinds: recent mobile carrier industry consolidation and higher interest rates, which CEO Jay Brown predicts will have a $350 million impact over 2024 and 2025.
However, most of its $21.6 billion debt as of March 31 is at fixed interest rates (91%), with only $2.9 billion due through 2025, minimizing the impact of elevated interest rates on its debt refinancing.
Despite these short-term challenges, the company has a promising future backed by the rising data consumption trend. Crown Castle has a considerable growth runway ahead with more than 40,000 cell towers, roughly 120,000 small cells and about 85,000 route miles of fiber optic cable. The average monthly smartphone data usage in the U.S. is expected to increase by over 135% from 2023 to 2028, reaching 56.8 gigabytes. This surge in data consumption could result in 15% to 30% annual growth in small cells by 2025, adding 500,000 to 1 million cells. Therefore, the company's long-term outlook is encouraging.
Hormel Foods
Hormel Foods Corp. (HRL, Financial), a notable producer of consumer packaged goods, is facing some challenges. Recently, the company experienced a drag on its earnings due to soft results from its international segment, resulting in non-GAAP earnings of 40 cents per share, which missed forecasts by 1 cent, and revenue of $2.96 billion, which fell $90 million short. Despite these headwinds, the company is in the early stages of its turnaround and global expansion.
Owning a collection of sector-leading brands, such as SPAM, Skippy and the recently added Planters, Hormel continuously adds to its portfolio, extending its growth runway. Additionally, the stock is trading close to its 52-week low, only 2.11% above it. With a market cap of $21 billion, its stock price has decreased by around 20% over the past three years, underperforming the broader market and the average consumer staples stock. This decline has pushed its dividend yield up to 2.94%, which is at the high end of its historical yield range. Despite facing headwinds, Hormel increased its dividend by approximately 6% in the first quarter, showcasing its strength as a Dividend King.
Kraft Heinz
Finally, The Kraft Heinz Co. (KHC, Financial) is currently just 2% above its 52-week low, indicating a potential opportunity. With a business predictability rating of one star and a value of $93.1 million, it comprises a 0.22% weighting in the trust's equity portfolio.
Despite consumers pushing back on pricing in the second quarter, the company has been making strategic moves that could be favorable in the long run. Known for its ketchup, Kraft Heinz has brought innovation to the microwave with a new frozen food product and is looking at the school lunch market for growth. However, inflation and volume trends for the company are concerning.
For investors who believe in the deep-value turnaround story of Kraft Heinz, it might be worth keeping an eye on the company.
