Now that the S&P 500 is flirting with its all-time high levels, picking stocks that might outperform in the coming quarters becomes daunting for most investors. Luckily, the top holdings from some of the world’s largest investors are made publicly available today, allowing for reverse engineering the potential decision-making and upside case for these companies.

Today, investors can—and should—look into Bill Gates’ portfolio holdings, from some of the most stable names in the top five for size to smaller holdings that still bring a sense of growth into the overall portfolio, albeit with much less risk in terms of weight. Investors will be surprised to see these holdings focused across the manufacturing sector, the exporting areas of the United States, and even the consumer discretionary sector for balance.

Making this list of top holdings is Caterpillar Inc. (NYSE: CAT) to ride the potential bottoming in the real estate sector as mortgage volumes could make a comeback, then there is the waste and scrap material exporting giant Waste Management Inc. (NYSE: WM) to provide stability for Gates. Shares of On Holding (NYSE: ONON) also made it to his picks as a potential growth name to spark up his holdings apart from only being stable.

Why Caterpillar Stock Is Still a Strong Buy Opportunity Right Now

Bill Gates saw enough reasoning to justify investing up to $2.5 billion in the company, making it his fourth largest holding today in his entire portfolio. He isn't alone in his bullish view of Caterpillar stock, though. Some on Wall Street are pushing for the company to run into higher prices in the coming quarters.

Specifically, J.P. Morgan Chase recently reiterated their "Overweight" ratings for Caterpillar stock, also giving it a valuation boost. Where they previously valued the stock at $435 a share, the newest price targets, as of October 2024, now reflect a valuation of up to $500 for Caterpillar stock today.

Caterpillar stock would need to rally by as much as 30% from its current price to prove these new views right. Considering that the stock trades at 96% of its 52-week high, signaling bullish momentum already, these valuations call for a new high in the stock as well.

Overall, markets are still willing to pay a premium valuation for Caterpillar stock compared to other industrial sector stocks. On a price-to-book (P/B) basis, Caterpillar commands a 10.1x valuation compared to the industry sector's average multiple of 5.4x today.

Bullish price action, analysts' higher targets, and markets paying a premium for the stock are reasons investors can consider Bill Gates holding a buy today.

Waste Management Stock's Stability Leaves Short Sellers Backing Off

This low-beta stock made it to Bill Gates's portfolio as his second-largest position today. The large $7.5 billion allocation enjoys a dividend payout of up to $3.0 a share, translating into a 1.4% yield today. Investors won’t go running into Waste Management stock for this dividend; however, there are other, better reasons.

Over the past month alone, Waste Management stock’s short interest declined by as much as 6.4%, showing signs of bearish capitulation. The stock is a center of stability and steady returns year after year, and Wall Street analysts have something to say about the company’s future growth potential as well.

Expecting to see up to $2.08 in earnings per share (EPS) for the next 12 months, these analysts directly project as much as 6.1% growth in earnings. While this may not sound like much, it is impressive considering that the company’s market capitalization is $82.4 billion, where keeping high single-digit percentage growth becomes increasingly difficult.

Another reason to attribute Waste Management’s 35.8% 12-month performance is the company’s 14.3% return on invested capital (ROIC). This metric tends to drive a significant portion of a stock’s return for the year.

On Holding Stock Powers Bill Gates' Portfolio with Aggressive Growth

Analysts at KeyCorp now see On Holding stock trading as high as $60 a share, which calls for a new 52-week high for the company and a net upside potential of as much as 20.4% from where the stock trades today.

Other analysts project the company’s EPS to be up to $0.16 for the next 12 months, which promises a massive 60% growth from the latest quarter’s $0.10 in EPS. Comparing the current price targets to the potential growth in EPS for the company creates a significant divergence, which might call for analysts to revisit their valuations and potentially boost them.

These factors have also driven short sellers to walk away from the table. On Holding’s short interest declined by 9% over the past month to continue on a downtrend for the quarter, leaving more stock for bulls like Bill Gates to consider buying.

Some of these bulls came from institutions like Farther Finance Advisors, which decided to boost their stake in On Holding stock by up to 20.4% as of late October 2024. However, they were only part of the overall $1.3 billion in institutional capital that made its way into the stock over the past 12 months, giving new investors more confidence in their own purchases.