This Bill Gates Stock Just Hit a New 52-Week High and 1 Signal Says There’s More Room to Run

Bill Gates’ investment vehicle, Cascade Investment LLC, has been quietly accumulating wealth through its stake in Femsa, a Mexican holding company. The company’s new 52-week high of $141.47 may be attributed to various factors, but a closer look at the financials reveals a complex web of valuation that could be worth billions.

Femsa’s ownership stake in Coca-Cola Femsa, a leading bottler with operations in nine Latin American countries, is particularly noteworthy. With a market cap of $22.84 billion, Femsa’s 47.2% stake is valued at around $10.78 billion. However, when considering Femsa’s total market cap of $25.74 billion, the remaining businesses appear to be undervalued.

The value of Femsa’s operating units, such as OXXO Mexico and Americas & Mobility, can be evaluated by applying a multiple of 0.81x to their trailing 12-month revenue. This calculation reveals that these two units alone account for 67% of Femsa’s revenue, with OXXO Mexico contributing approximately 56%. According to this analysis, the value of these units would be around $19.72 billion, substantially higher than the $14.96 billion attributed to them under current market conditions.

The disparity in margins between OXXO Mexico and Americas & Mobility highlights the varying levels of value within Femsa’s diverse portfolio. While OXXO Mexico boasts a healthy operating margin of 8.9%, Americas & Mobility’s operating margin is a paltry 0.7%.

Femsa’s diversified revenue streams, including its digital app Spin by OXXO, add to its overall valuation potential. Most analysts covering FMX in Mexico rate it Outperform (1.77 out of 5), indicating a strong consensus among experts about the company’s long-term prospects.

The disconnect between Femsa’s current market cap and its potential value underscores a fundamental issue: the holding company discount. This concept arises when valuing conglomerates like Femsa, where higher multiples are assigned to individual operating units than to the overall company. By reevaluating this anomaly, investors can tap into significant opportunities for growth.

As second-quarter results begin to roll in, it will be fascinating to see how Femsa’s financials reflect its growing potential. With Bill Gates’ Cascade Investment LLC firmly entrenched as one of its largest shareholders, Femsa has a compelling narrative worth paying attention to.