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, PDL Capital (355 clicks)
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People tend to follow Warren Buffett's stock purchases like lemmings, but I've also taken a close look at the track record of Microsoft (NASDAQ:MSFT) founder Bill Gates and he's done pretty well for himself, also. In looking over some of his recent purchases, I have to agree that his choices have a lot of merit and are worth digging into.

Ecolab (NYSE:ECL) provides cleaning and sanitizing products and programs, as well as pest elimination, maintenance, and repair services to the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care, commercial facilities management, and vehicle wash sectors. Sanitation has always been big business. The company is on track to grow earnings 15% annually over the next five years, has $163 million in cash, and $703 million in low-interest debt. Mr. Gates' foundation own about 12% of the company (25.6 million shares), and just added about 5 million shares in the past 6 weeks at an average price of about $50. This looks like a buy to me.

Trash is apparently something Mr. Gates is interested in, because he also owns 20% of Republic Services (NYSE:RSG). The company has $320 million in cash and $6.9 billion at an interest rate of about 8.5%, and has over $700 million of FCF in its TTM. The company is projected to grow 12.65% annually over the next five years, and trades at a current P/E of 15. Mr. Gates, however, just added 3.7 million shares in late August at the present stock price. One might argue that Waste Management (NYSE:WM) is the closest valuation peer, and it trades at a P/E of 15 on 5 year annualized projected growth of only 10%. It seems Republic is the more undervalued of the two.

Mr. Gates' other significant holding is Western Asset/Claymore Inflation-Linked Opportunities and Income Fund (NYSE:WIW). This fund is focused on bonds and asset-backed securities, with 80% of its assets in U.S. TIPS bonds. It has a 3% yield and even trades at a 12% discount to its NAV. I'm not as crazy about this purchase. I prefer some of the selections I made in my article on fixed income for the perfect portfolio. I'd instead go for SPDR Barclays Capital High Yield ETF (NYSEARCA:JNK), Fidelity US Bond Index, and SPDR Barclays International Treasury Bond ETF (NYSEARCA:BWX) to create a similar yield and risk pattern. You could also create a similar portfolio with a few stocks like Coca-Cola which yields 2.7% and is undervalued at a 13 P/E, Phillip Morris International which offers a 4% yield and also fairly valued at a 15 P/E, and AT&T yielding 6%.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Bill Gates Bought These 3 Stocks - Should You?