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Introduction: Billionaire Microsoft founder Bill Gates, renowned for his tech industry insights, has made a notable addition to the Bill and Melinda Gates Foundation Trust’s portfolio during the third quarter. Gates purchased shares of the iShares U.S. Technology ETF (IYW), sparking interest among investors. While Gates’ investment decisions often hold significance, should retail investors consider following suit?
Bill Gates as an Investor: Beyond his Microsoft legacy, Bill Gates is a substantial investor with a portfolio value of around $38 billion through the Bill and Melinda Gates Foundation Trust. His association with investing guru Warren Buffett, who is also a trustee for the Foundation, underscores Gates’ commitment to learning from seasoned investors. The recent 13F filing provides a glimpse into Gates’ investment moves and reveals an added interest in tech stocks and IYW.
IYW ETF Overview: The iShares U.S. Technology ETF (IYW) seeks to mirror the performance of a U.S. technology sector index. Launched in 2000, IYW holds assets totaling $12.6 billion. The ETF offers exposure to various U.S. technology segments, including electronics, computer software and hardware, and information technology companies.
IYW’s Robust Portfolio: With a comprehensive portfolio featuring 134 stocks, IYW’s top 10 holdings, constituting 64.2% of the fund, include industry giants like Apple, Microsoft, Meta Platforms, and Alphabet. The impressive Smart Scores of 8 or above for each top holding indicate strong market performance. IYW itself boasts a commendable Outperform-equivalent ETF Smart Score of 8.
Long-Term Performance: IYW has demonstrated stellar long-term performance, recording a remarkable 49.5% gain in the past year amid the tech sector surge. Over three, five, and ten years, the ETF has delivered annualized returns of 12.8%, 19.2%, and 18.6%, respectively. On a cumulative basis, a hypothetical $10,000 investment in IYW a decade ago would now be nearly $46,000.
Expense Ratio Consideration: While IYW’s expense ratio stands at 0.40%, which is reasonable, it warrants consideration. An investor committing $10,000 to the fund in the first year would incur $40 in fees. Comparatively, other tech-centric ETFs may have higher expense ratios, but alternatives like the Invesco QQQ Trust and Technology Select Sector SPDR Fund offer lower ratios.
Analyst Sentiment: Wall Street analysts provide a Moderate Buy consensus for IYW, based on 112 Buys, 23 Holds, and zero Sell ratings in the past three months. The average price target of $126.16 implies a potential 9.55% upside. Gates’ addition of IYW to his portfolio suggests confidence in the ETF’s outlook and potential for continued growth in U.S. tech stocks.
Conclusion: Bill Gates’ recent investment in the iShares U.S. Technology ETF (IYW) highlights potential opportunities in the U.S. tech sector. While Gates’ strategic moves often garner attention, investors should carefully weigh the ETF’s performance, expense ratio, and analyst sentiment before deciding to follow in his footsteps.
