Why weren’t we all listening to Bill Gates?
Did we not think that he was smart enough? Maybe we didn’t think his business track record merited respect of his opinion?
I mean his net worth is barely $100 billion at this point… and he has only dedicated his entire life now to learning about things such as global pandemics while using his wealth to save lives across the world.
With an IQ of 160 are we supposed to be impressed that he is equal to the likes of Einstein and Stephen Hawking? (1)
Bah — he hasn’t even had a reality show on television! This is 2020 — if you don’t have a reality show how important can you really be?
My tongue is firmly planted in my cheek of course… because sadly Mr. Gates looks very smart today. He has been warning the world for years that a pandemic was coming and that we weren’t even close to being prepared for it.
He wasn’t selling us something, he was trying to save us.
If the right people in important positions had been paying attention an enormous number of lives would have been saved, people would still be working and society much better off.
You can check him out in 2015 with this Ted Talk that he titled… “The Next Outbreak – We Aren’t Ready”. Kind of nailed it right there in the name didn’t he?
He wasn’t joking around either, it seems he actually wanted someone to pay attention to him and do something. In 2017 Gates again gave a speech in Munich in which he said:
Whether it occurs by a quirk of nature or at the hand of a terrorist, epidemiologists say a fast-moving airborne pathogen could kill more than 30 million people in less than a year. And they say there is a reasonable probability the world will experience such an outbreak in the next 10-15 years.
Gates was right, and it only took 3 years — although hopefully the death toll is far lower than 30 million. Hard to say at this point as COVID-19 hasn’t peaked and is just taking hold in the heavily populated and vulnerable populations of the developing world.
How did Gates make this prescient call on a pandemic threat? It isn’t that smart people just “know” things……his fortune hasn’t allowed him to buy a crystal ball. It is because he reads, reads and reads some more. Throw all vast amounts of information into a brain like his and it can reach some pretty darn sensible conclusions.
What might you ask does this have to do with investing?
This Is Peculiar – A Beaten Down
Mexican Closed-End Fund
Gates has devoted the rest of his life and his fortune to philanthropy. He is carrying out that mission through The Bill & Melinda Gates Foundation.
Those efforts have famously been helped by his best pal Warren Buffett also dedicating his entire fortune to philanthropy… and turning the allocation of those billions over to The Bill & Melinda Gates Foundation.
The dollars donated to date are kept in The Bill & Melinda Gates Foundation Trust — which at the end of 2019 had more than $21 billion invested in publicly traded U.S. listed securities. (2)
Like his pal Buffett, the Foundation’s portfolio keeps a very concentrated portfolio. The $21 billion was split between just 16 different stocks, with Buffett’s Berkshire Hathaway (BRK.A-NYSE) representing 52% of the holdings.
The other names in the portfolio include the likes of Walmart (WMT-NYSE), FedEx (FDX-NYSE), Caterpillar (CAT-NYSE), Waste Management (WM-NYSE) and other blue chip type stocks. That makes sense given that trying to squeeze a $21 billion portfolio into small-cap stocks is pretty much a waste of time and because the portfolio of a charitable foundation must always be focused on avoiding losses.
On March 27, 2020 however… The Bill & Melinda Gates Foundation made a most interesting filing with the SEC. (3)
The filing revealed that the Foundation had acquired 5.0% of the outstanding shares of The Mexico Fund (MXF-NYSE) — a closed-end fund that is focused on investing exclusively in Mexican companies.
It is a surprising purchase all-around. The Foundation now owns 751,000 shares that trade for $8.20… a total value of $6.2 million. That is $6.2 million versus a total portfolio of $21 billion — which is a rounding error on a rounding error.
No surprise, The Mexico Fund has taken a beating of late. The trading price has been cut in half from over $14 to under $7 in a month. It is now back over $8 but still almost needs to double to trade where it was pre-pandemic just one month ago.
At the recent trading bottom the discount to NAV that the fund trades at had blown out to 22%. Closed-end funds trade on the open market and often trade at a price that is lower than the value of the securities they hold (the NAV). The fund is now back to an 8% discount which I think is probably due to Gates name suddenly drawing some interest.
What the fund holds it basically a list of blue chip Mexican companies. Almost two-thirds of the portfolio are in the top 10 holdings as listed below:
The largest holding America Movil (AMX-NYSE) is the dominant telecommunications player in Latin America, Grupo Financiero Banorte (GBOOF-OTC) is one of Mexico’s four largest banks, Fomento Econ Mexico (FMX-NYSE) is the largest independent Coca-Cola bottler in the world… you get the picture.
The Mexico Fund is a way to bet on Mexico’s blue chip stocks.
These companies pay some serious dividends. The blended yield of the 30 stocks in the portfolio is currently 6.5%.
The Mexico Fund distributes that dividend income out to the owners of the fund. Distributions for the past two years have been:
2018 – $0.635
2019 – $0.569
On the current share price those distributions are a yield of 7.7% and 7.0%. Not too bad.
Bill Gates of course isn’t picking the investments of the Foundation’s portfolio personally. That is being done by a gentleman named Michael Larson who has handled investing for Gates since the 1990s.
It is no coincidence that Larson manages the portfolio in a manner similar to Bill’s best pal Buffett, and the results of the portfolio managed by Larson over decades have been reported to be in the double digits. (4)
If economies and markets rebound before the end of 2020 I think The Mexico Fund stands a good chance at being pretty close to a double over that time. The downside from this group of Mexico’s best companies if the economic recovery is slow seems to be a nice dividend and a slower rebound in the unit price.
Not a bad looking risk/reward setup.
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