Bill Gates has a secret. It's something very few people know.
For the most part, only those who closely follow his business or
work with him are aware of this secret.
As the second wealthiest person on Earth, with anet worth of
about $65 billion, Gates stepped down from the lead role at
Microsoft (Nasdaq: MSFT)
a few years ago to dedicate his life to philanthropy. He is already
credited with giving away nearly $30 billion through the Bill and
Melinda Gates' Foundation -- the largest transparently operated
nonprofit foundation in the world.
The foundation has noble goals of easing poverty and enhancing
health care worldwide. It is estimated this foundationwill have
saved 8 million lives by 2020. The Gates Foundation is so well
respected that other well-known executives are also part of
it.Warren Buffett , for instance, sits on theboard of directors and
has pledged the majority of his wealth to the cause. You can't get
much better of an endorsement than from the Oracle of Omaha.
But what very few people realize is that the majority of Gates'
wealth is held within a for-profit firm. You likely have never
heard of it, unless you are in the hedge-fund business or follow
I'm talking about CascadeInvestment LLC, a private holding
company for Gates'investments . Managed by Michael Larson, a
successful value investor, the company is headquartered in
With Gates and his family being the only shareholders, Cascade
is funded by the sale of Microsoftshares . Nearly every trading day
for the past 20 years, Gates has quietly sold off his Microsoft
shares, in an effort not to alter the stock price, transferring the
after-tax proceeds to Cascade Investment. Cascade turns around and
reinvests thefunds into a myriad of other public companies.
Clearly, extremedue diligence by Gates and hisportfolio manager
Michael Larson is conducted into each investment. Throw in the
Buffett's influence, and Cascade's investments have likely passed
the most rigorous of tests.
Despite the secrecy surrounding Cascade Investment and its
holdings, the firm is still required to file SEC 13D forms to
reveal some of its major trades. Because they must be filed within
10 days by anyone who acquires beneficial ownership of more than 5%
of any publically-traded company, 13D filings are more timely and
actionable than the quarterly13F filing.
What this means for regular investors like you and me is that we
can simply follow the moves of Cascade to take advantage of the
finest due-diligencemoney can buy.
Here's are two of Cascade's latest investments that are great
opportunities for profits.
1. Deere & Co (
Gates ramped up his holding in the farm and heavy-equipment
manufacturer by 3 million shares from Dec. 7 through Dec. 10. This
increased his stake in the company from 5.8% to a 7%.
Gates' last major increase in Deere shares was in August 2011,
when he owned 24.5 million shares.
The company'sbalance sheet appears strong. Deere posted a
13%revenue gain in 2012 and is forecasting an additional 5% growth
rate for 2013. I am certain Gates is pleased with Deere's 14%
third-quarter equipment sales growth and a 13-cent increase
inearnings per share (
) to $1.75 during the same time frame.
Most interestingly, the farm equipment sector, and Deere in
particular, has benefitted by the highcommodity prices and low
equipment financing rates this year.
As a trade, there is heavy technical resistance at $87 a share
on the daily chart. This creates a breakout entry opportunity on
the first daily close above $87 a share.
2. AutoNation (
Cascade Investment is a 10% owner of the auto dealer chain. 13D
filings reveal Cascade performedmultiple "buy" transactions during
the first half of 2012. These transactions make it clear that Gates
is a hugebull when it comes to auto sales and the U.S.economy .
Shares rocketed higher by 31% for the year into mid-October.
Next, the company posted a slight miss of third-quarterearnings ,
resulting in shares giving back 20% of their gains for the year.
Surprisingly, profits soared 40% and revenue jumped 12% during the
Apparently, investors were spooked by the company slowing down
its share repurchases in the third quarter. As a result, the stock
price is holding right on the 200-day simplemoving average in the
$38-39 range. Technically strong, triple-bottom support has been
built at $38, creating a great buying opportunity for the stock
Risks to Consider:
Both stocks face heavy headwinds from the shaky economy.
Although I believe things are improving, there remains much risk
ininvesting in stocks closely tied to economic growth. Always use
stops and position size relative to your risk tolerance when
Action to Take -->
I really like both of Cascade's investments detailed above. Deere
is set up to be a perfect breakout candidate. My 12-month target
price on the heavy equipment maker is $95 a share. AutoNation has
pulled back into the value "buy" zone while holding onto support at
the 200-day simple moving average. I like it right now as a buy
with a 12-month target of $48 a share.
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