Bill Gates’ old company, Microsoft (NASDAQ:MSFT), would undoubtedly be on his list of AI stocks to buy. I suspect it’s on most AI investors’ must-own list.
At the end of December, the Bill & Melinda Gates Foundation Trust had invested $42.3 billion in U.S.-listed stocks, according to the foundation’s 13F. Those assets were invested in 24 stocks, with Microsoft accounting for one-third of the portfolio’s assets.
That means the average market value of the remaining 23 stocks was approximately $1.2 billion–not insignificant, but less than one-tenth of the MSFT holdings.
Of the remaining 23 holdings, the three largest investments are in Berkshire Hathaway (NYSE:BRK.B), Canadian National Railway (NYSE:CNI), and Waste Management (NYSE:WM). Of those three, only Berkshire stands out as an AI stock, and that’s only because of its massive investment in Apple (NASDAQ:AAPL).
From the remaining 20 holdings, three stocks utilize AI in their businesses and are good long-term holds.
Schrodinger (SDGR)
Schrodinger (NASDAQ:SDGR) is the smallest of the three AI stocks to buy with a $1.91 billion market capitalization. It accounts for 0.60% of the foundation’s assets.
The company’s AI-powered software technology platform helps drug companies select the best molecules for their treatments. Its clients include all 20 of the world’s largest drug companies.
The company makes money by licensing its software to life sciences and materials design companies, with approximately 1,785 customers worldwide. In 2023, it generated $159.1 million in software revenue, with 54 customers spending more than $500,000 on its platform. 27 spent over $1 million, up from 18 a year earlier. As a result, its software revenue increased by 17.4% in the past year.
It also makes money from its own drug discovery programs—it currently has seven in the pipeline—which generated $57.5 million in 2023 revenue, up from $45.4 million a year earlier.
With its software’s high gross margins (87%), it generated a $40.7 million profit in 2023, up from a $149.2 million loss. Schrodinger expects to grow software revenue by 9.5% in 2024 at the midpoint of its guidance.
Deere & Co. (DE)
Deere & Co. (NYSE:DE) is the second-largest of the three stocks with a $111.02 billion market capitalization. It accounts for 3.3% of the foundation’s assets.
I recommended DE stock in March 2023 as one of three AI stocks to buy over $100 to be on investors’ watchlist. However, it has not lived up to its potential, gaining just 1.5% over the past year; its total return over the past 52 weeks is up 2.3%, thanks to its dividend.
However, its five-year annualized total return is impressive, up 21.8%, surpassing the U.S. markets and its peers in agriculture and heavy construction.
As I said in my article last year, Deere has been on a quest to automate farming since the 1990s. Between machine learning and computer vision, Deere’s Senior Vice President & Chief Technology Officer, Jahmy Hindman, believes that machine learning will help farmers make better decisions at scale, and that computer vision will enable them to see beyond today’s agricultural norms.
That’s huge for a planet expected to reach 10 billion in population by 2050 and is already fighting significant food shortages.
Deere stock will eventually snap out of its funk, as it did in 2020.
Danaher (DHR)
Danaher (NYSE:DHR) is the largest of the three stocks, with a market cap of $183.73 billion. It accounts for 0.2% of the foundation’s assets. It’s not the smallest investment, but it’s pretty close.
Danaher stock came close to $300 in Sept. 2021 but has since fallen to a low of $182.09 this past October. However it has rebounded nicely over the past five months.
One area where companies like Danaher will leverage AI is predictive modeling and machine learning. In June 2023, Danaher sponsored an article in the healthcare industry trade publication Fierce Pharma entitled Enabling Science at Scale.
Written by William Blake, Danaher’s Chief Technology Officer, Human-Based R&D for the Life Sciences companies, it discussed the difficulties biopharma companies and their leaders face regarding scaling their businesses. Blake wrote that a solution is the adoption of engineering biology.
“Applying an engineering biology approach will require biopharma developers to adopt automation at every stage, from early discovery through manufacturing, and to lean on artificial intelligence to improve their processes. And it will demand that best practices be industrialized to improve and accelerate the innovation of new cures,” Blake wrote on June 19, 2023.
Blake stated that several of its life sciences businesses can help with the transition.
Blake wrote, “By embedding artificial intelligence and machine learning into process data management, researchers can generate insight to optimize decision-making at all stages of development.”
If there is a company that should embrace AI, Danaher is it.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
