Bill Gates, the Microsoft (MSFT) co-founder and a renowned investor, has made a $373 million investment in the transportation sector during the third quarter, signaling his confidence in its recovery potential for 2025. Through the Bill & Melinda Gates Foundation Trust, he has strategically acquired stakes in FedEx (FDX) and Paccar (PCAR).
The timing of these investments is particularly noteworthy as Gates recently divested nearly 25% of his Microsoft holdings to diversify his portfolio. This move comes at a particularly interesting time, as the S&P 500 Transportation Index ($SYTR) rose by only 3.4% while the broader S&P 500 Index ($SPX) has surged by 22% over the past year.
Gates’ decision appears to be driven by several key factors, including an anticipated economic recovery, falling interest rates, and the growing demands of global e-commerce.
Should other investors follow in Gates’ footsteps? Let’s take a closer look at FedEx and Paccar to understand the potential behind Gates’ significant bets on these transportation giants.
Transportation Stock #1: FedEx (FDX)
Global shipping giant FedEx (FDX) has caught the eye of Bill Gates, who purchased 1 million shares in Q3 2024.
FDX, headquartered in Memphis, Tennessee, specializes in package delivery, logistics, and freight services, operating one of the world’s largest cargo airlines and an extensive ground delivery network.
For income-focused investors, FedEx offers a reliable annual dividend yield of 2.01%, with an annual rate of $5.52 per share. Currently trading near $277, FedEx has weathered recent market turbulence well, posting an 11% gain over the past 52 weeks despite a slight YTD decline of 1.8%.
The company’s market value stands at $66.14 billion, with its shares trading at an attractive forward P/E of 14.22x – notably lower than the industry average.
FedEx’s recent performance tells an interesting story. In the second quarter of its fiscal 2025, FedEx reported revenue of $22.0 billion, slightly down from $22.2 billion year-over-year. However, CEO Raj Subramaniam highlighted impressive operational improvements, with the Federal Express segment showing growth despite headwinds from weak U.S. domestic demand and the expiration of its U.S. Postal Service contract.
Looking ahead, FedEx has made bold moves to enhance shareholder value. The company announced plans to separate its Freight division into a standalone public company within 18 months, a decision that excited investors. It has also completed $1 billion in share repurchases, with plans for an additional $500 million buyback in fiscal 2025.
FedEx’s updated outlook for fiscal 2025 indicates that adjusted earnings are expected to be between $19 and $20 per share. Additionally, the DRIVE transformation program aims to achieve $2.2 billion in cost savings.
Given this context, Gates’ investment may represent a timely opportunity for investors to consider following his lead.
The market’s confidence in FedEx is reflected in analyst sentiment, with a consensus “Moderate Buy” rating. Their mean target price of $324.15 suggests an appealing 18% upside from current levels.
Transportation Stock #2: Paccar (PCAR)
Paccar (PCAR), headquartered in Bellevue, Washington, is a global leader in designing and manufacturing premium commercial vehicles under the Kenworth, Peterbilt, and DAF nameplates.
Bill Gates also acquired 1 million shares of PCAR stock in Q3 2024, signaling confidence in Paccar’s future growth potential.
The company offers a quarterly dividend of $0.33 per share with a yield of 1.22%. In a notable move, Paccar recently declared an extra cash dividend of $3 per share, paid on Jan. 8, 2025, demonstrating its financial health.
PCAR stock is trading at $110.40 posting a nearly 17% gain over the past 52 weeks despite a recent 2.6% monthly decline.
The company’s market capitalization of $56.71 billion and attractive valuation metrics including a P/E ratio of 12.08x suggest the stock may be reasonably priced compared to industry peers.
Paccar’s third-quarter 2024 performance remained robust, with CEO Preston Feight announcing net income of $972.1 million ($1.85 per diluted share) on revenue of $8.24 billion. While these figures represent a decrease from the previous year’s net income of $1.23 billion, the company maintained operational efficiency, with global truck deliveries reaching 44,900 units. Analysts project Q4 2024 earnings of $1.71 per share on revenue of $7.53 billion.
Recent strategic moves include the completion of the PACCAR Winch division sale. This divestiture allows Paccar to streamline its operations and focus more intently on its core truck manufacturing and technology operations.
Additionally, Paccar expects Class 8 retail sales in 2025 to be between 250,000 and 280,000 vehicles, indicating potential market growth.
Wall Street maintains an optimistic outlook on PACCAR, with a consensus “Moderate Buy” rating and a mean target price of $117.61, implying 8.7% upside potential.
Conclusion
Should you follow Bill Gates into FedEx and Paccar stocks? The numbers make a compelling case. Both companies show solid fundamentals, strategic growth initiatives, and attractive valuations. FedEx’s 18% potential upside and PCAR’s steady performance in the transportation sector suggest these aren’t random picks. Investors should do their own research, but Gates just may be on to something.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.