What do you do if you have $50 billion in net worth and almost all of it is tied up in a tech, formerly high-growth company? Let's say that company was Microsoft (MSFT), and you were Bill Gates. How would you diversify?Cascade Investment is a private equity firm owned by Gates, his investment vehicle outside of Microsoft. (You can see Cascade's complete list of holdings on Stockpickr by clicking here.) Whenever he sells shares of Microsoft and he's not sending that money immediately to charity, it probably finds its way to Cascade, where he diversifies into stocks as far from Microsoft as can be imagined. At Cascade, you can clearly see the influence of Warren Buffett. ( Click here to see Warren Buffett's Stockpickr page and his top and recently changed holdings.) Their portfolios don't overlap much -- although both own Berkshire Hathaway ( BRKA) stock, where Gates is a director -- but they do have a few qualities in common:
- A focused portfolio: Cascade has $3.6 billion in investments in only 10 holdings; Buffett has long been a proponent of maintaining focus, as there are only so many companies an investor can really study at a time.
- Very consistent earnings and growth.
- Boring businesses.
- Sometimes, good brands.
|Republic Services (RSG) |
Even at these highs, the company still seems cheap. It has $854 million in EBITDA (earnings before interest, taxes, depreciation and amortization) and $7 billion in enterprise value (market cap minus net cash). So the company has a multiple over cash flows of just 8.5, which puts it in takeover territory.