The Internet would not have grown as quickly as it did without
Bill Gates. The Microsoft founder standardized software for the
personal computers that are now linked together on the
From our current perspective, it is obvious that software
needs to be compatible with other software. But, in the 1980s,
before Microsoft made Gates a billionaire, it was actually common
to find computers even within a single office with different
operating systems and software products like word processing.
Gates saw through the disorder and provided standards that made
PCs more useful, setting the stage for the Internet.
His investment style shows a similar ability to create order.
According to recent SEC filings, Gates controls more than $17
billion worth of stock market investments through the Bill and
Melinda Gates Foundation. Of all the thousands of potential
investments, this fortune is invested in only 21 stocks. Gates
obviously likes to focus his attention on just a few
opportunities at any one time.
His largest investment is in
Berkshire Hathaway (NYSE: BRK)
. The Gates Foundation owns more than $8 billion worth of this
stock. Bill Gates also sits on Berkshire's board of directors and
has access to the investment insights of Warren Buffett.
It is interesting to note that Gates did not make any new buys
in the three months that ended June 30, 2013. He did sell five
stocks that made up only a small part of his portfolio.
We can see that Gates is a patient and selective investor. As
individual investors, it can be difficult to be as patient as a
billionaire. Meeting our financial goals generally requires us to
earn a profit on our investments in a reasonable amount of time.
To do this, I developed a trading system that identifies timely
I start with a list of stocks owned by great investors like
Gates. He has access to brilliant analysts, and they have
selected each stock based on its long-term potential. I then look
for the stocks on that list that are moving higher faster than
the rest of the market and are increasing cash flow.
Relative strength (
) is a way to identify stocks that are moving higher now. It
ranks all investments on a scale of zero (weakest) to 100
(strongest). A number of research studies show stocks that have
moved up the most in the past six months (those with high RS) are
likely to outperform the market in the next six months.
Cash flow growth is often seen among stock market winners.
This is a fundamental measure that is usually more reliable than
My system buys when RS is high and cash flow is growing. From
the list of stocks in the Gates Foundation, only two are
considered buys using these rules right now.
Known for environmentally friendly products,
serves a variety of markets. The company offers cleaners and
sanitizers for washing dishes and kitchen equipment for the food
service industry, and housekeeping supplies for the hospitality
industry. It also provides products for the health care,
industrial and energy markets.
Revenue topped $12 billion in the past 12 months. Growth in
earnings per share (
) averaged 12.65% a year over the past five years and is expected
to accelerate to more than 15% a year in the next five years.
Free cash flow has turned positive in the past 12 months and
increased almost 50% in the last year.
Investors have pushed the stock price up nearly 35% since the
beginning of the year, and ECL has an RS rank of 100, meaning it
has been a top performer in the stock market over the past six
Grupo Televisa (
provides programming and cable and satellite services to viewers
in the U.S., Mexico, the Dominican Republic and other countries.
The company reported more than $5.5 billion in revenue over the
past 12 months and earnings of more than $680 million, or $1.10
per share. Cash flow per share doubled in the past 12 months.
Grupo Televisa is up only 6% since the beginning of the year,
but has an RS rank of 72, just above the buy level of 70 I use
for this indicator.
As I mentioned earlier, following market "gurus" like Bill
Gates is one of the best ways to make money in the stock market.
Investors should consider joining Bill Gates as long-term
shareholders of ECL and TV.
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