ETFs To Invest Like Bill Gates

by on August 11, 2010 | ETFs Mentioned:

In the San Francisco Bay area during the 1970′s, a revolution was brewing. The emergence of an area dubbed “Silicon Valley” brought about a surge in technological development that changed the world forever. Two young innovators at the forefront of that revolution were Bill Gates and Paul Allen, the founders of what eventually became Microsoft. Sensing a tremendous opportunity in the computer market, Gates dropped out of Harvard to pursue his dream–no doubt a decision that changed the course of tech history.

Microsoft, of course, would come to dominate the personal computer market, making its founders billions of dollars in the process. Gates is now counted as one of the wealthiest men in the world. So what does a billionaire do with the massive fortune he has accumulated? Invest it of course. Gates still remains active with his fortune, owning several investment firms as well as the being the single largest shareholder in Microsoft. He is now the author and co-author of several books and is a well-known philanthropist. Though no investments have paid off as handsomely as his initial bet on Microsoft, Gates has built a rather impressive track record over the last several decades, multiplying his fortune several times over.

Gates’ Bets

Among Gates’ recent areas of investment focus: cleaner car technology, specifically through the engine manufacturer EcoMotors. Gates recently allocated $23.5 million to this Detroit-based company because he believes that our current combustion engines are quickly becoming a thing of the past. The engines that EcoMotors hopes to build “will have less mass, will cost less to make, will be more fuel-efficient and will generate lower emissions” writes Jolie O’Dell. The products will be opposed-cylinder (opoc) engines, and will use roughly half the parts of the average automobile engine. Gates’ contribution has given the firm the funds it needs to test and produce a prototype in the coming months [see also Earth Day Special: Definitive Guide To Clean Energy ETFs].

Through the Bill and Melinda Gates Foundation, Microsoft’s founder has pledged support to a variety of philanthropic initiatives around the world. In 2010, one of the organization’s focuses has been Africa. A partnership with Coca Cola is designed to benefit fruit farmers in Uganda. Gates has visited Nigeria twice over the last two years, and has pledged at least $150 million to fight polio in the African country. Beyond simply donating medicine and food, Gates has taken an interest in assisting African farmers and other workers in improving the viability and profitability of their small businesses. Gates seems committed to helping Africa help itself, and he has the money to make quite an impact (especially in the wake of a recent pledge by a number of American billionaires to give away half their wealth to charity)

Finally, Gates, along with fellow billionaire Warren Buffett, has been investing consistently in Republic Services over the past 3 years. Gates alone holds nearly $2 billion (roughly 66 million shares) in this waste management firm.

Most investors don’t hold Bill Gates in the same class as Warren Buffett and Bill Gross, but the self-made billionaire has done quite well for himself in the investment arena. Below, we outline three ETF ideas for investors interested in following in the footsteps of the Microsoft Man.

PowerShares Global Progressive Transportation Portfolio (PTRP)

PowerShares’ PTRP measures the Wilder NASDAQ OMX Global Energy Efficient Transport Index, a benchmark that includes global companies engaged in businesses that stand to benefit substantially from a societal transition toward using cleaner, less costly and more efficient means of transportation. The fund offers roughly 70% international exposure with the rest of the assets in domestic U.S. companies. PTRP includes holdings in multiple market sectors, including big weights in business services (36%), industrial materials (25%), and consumer goods (30%) [see all of PTRP's fundamentals here].

Though EcoMotors does not appear in the holdings of PTRP, the investment thesis driving this fund appears to be consistent for Gates’ rationale for investing in the engine manufacturer; both are bets that the clean car industry will grow considerably in coming years. This ETF allows individual investors to reap the benefits of a possible boom in this relatively new (and still relatively risky) sector [see also Who Else Wants An Automotive ETF?]

Market Vectors Africa ETF (AFK)

Gates’ investment in Africa has not been made with the intent of turning a personal profit, but rather in improving the quality of life and economic outlook in poverty-stricken regions of the continent (most investments in Africa have come through his foundation). If Gates is successful in his efforts to empower African farmers and improve the continent’s economic prospects, one ETF that could get a lift is the Market Vectors Africa ETF (AFK). This fund tracks the performance of the Dow Jones Africa Titans 50 Index, a benchmark comprised of companies that are headquartered in Africa or that generate the majority of their revenues in Africa. While the fund’s biggest country allocation is to South Africa (26%), it also includes exposure to a number of poorer African economies that could benefit from Gates’ generosity and vision [see complete breakdown of AFK's holdings].

Market Vectors Environment Index ETF Fund (EVX)

This ETF follows the NYSE Arca Environmental Services Index, which provides exposure to publicly traded companies that engage in business activities that may benefit from the global increase in demand for consumer waste disposal, removal and storage of industrial by-products, and the management of associated resources. Republic Services, the firm in which Gates has established a huge position, is the ETF’s second highest holding, accounting for 10.2% of the fund’s assets. Other big names in the top holdings include Stericycle (10.3%) and Waste Management Inc. (9.6%), in which Gates also has a sizable investment of nearly $540 million. EVX’s 23 securities are mostly domestic, with just over 8% distributed to international firms [see EVX's fact sheet here]. The ETF has gained about 4% this year and charges an expense ratio of 0.55%.

The play on consumer waste disposal is essentially a play on a broader economic recovery; as the economy expands, people produce more garbage. EVX offers an opportunity to establish diversified exposure to a sector that has clearly caught the eye of Gates [as well as some other well-known investors; see ETF Plays To Invest Like Buffett, Fisher, Paulson].

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Disclosure: Photo courtesy of Severin Nowacki at World Economic Forum. No positions at time of writing.