Bill Gates is one of the most famous businessmen in the world. He co-founded Microsoft and led the tech giant for years, establishing it as the leader in enterprise software and essentially creating a monopoly in PC operating systems with Windows. However, Gates stepped down as CEO of Microsoft in 2000 and has since pursued philanthropy, primarily through the Bill and Melinda Gates Foundation.

The Microsoft founder is still one of the richest people in the world, and the foundation’s portfolio reflects that as it has more than $45 billion in assets under management. Gates doesn’t manage it directly but oversees the management as he and his ex-wife Melinda are the sole trustees.

Given the size of the portfolio, it’s worth looking at the quarterly changes for insights into the market, and two stocks the trust purchased in the third quarter give a strong signal. The Foundation trimmed its top three holdings, which are Microsoft, Berkshire Hathaway, and Waste Management, but its purchases in the period were more noteworthy.

The fund purchased 1 million shares each of FedEx (FDX 1.63%) and Paccar (PCAR 0.61%). Below, let’s look at what each stock has to offer and why the Gates Foundation might have purchased them.

Image source: Getty Images.

1. FedEx

FedEx is one of the largest package-delivery companies in the world — but it doesn’t just handle parcel deliveries. It’s also the largest less-than-truckload (LTL) carrier in the country, so it handles small point-to-point shipments for businesses.

Like much of the rest of the transportation industry, FedEx is a cyclical business. It’s even seen as a bellwether for the broader economy as package shipments tend to increase during economic expansions and decline during recessions.

Year to date, FedEx is up 17%, but it’s been a roller coaster year. In its most recent quarterly report in September, the stock fell double digits after it reported weaker-than-expected results and cut its guidance for fiscal 2025.

Revenue in the quarter declined slightly to $21.6 billion due to a sales-mix shift and lower demand for priority services, and net income fell to $790 million. It also cut its revenue-growth guidance to the low single digits.

The company is in the process of restructuring the business through its DRIVE transformation plan, which is expected to achieve $2.2 billion in permanent cost reductions this fiscal year.

2. Paccar

Paccar is a maker of commercial trucks under brands such as Kenworth, Peterbilt, and DAF. Like FedEx, the company has a lot of exposure to the global economy as trucking companies that buy its products are more likely to spend when they’re confident in demand and in sustainable economic expansions.

Paccar also posted a decline in revenue in its third-quarter earnings report as sales were down 5.2% to $8.24 billion, though that was much better than the consensus at $7.65 billion. Earnings per share declined from $2.34 to $1.85, which edged out estimates of $1.82.

The company said market share remained strong as Kenworth and Peterbilt claimed 31.1% of the global truck market. Paccar didn’t offer guidance, but it did report revenue growth in its parts and financial services segments, showing the less cyclical parts of the business remain solid.

Overall, Paccar is performing well in a sluggish global commercial truck market.

A bet on a transportation recovery

Those two purchases show the fund is clearly bullish on a transportation recovery, and it’s easy to see why. Interest rates are falling in the U.S. and much of the rest of the world, which is likely to encourage borrowing, business investment, and economic expansion.

In the U.S., the manufacturing sector has been in a recession for the last two years, according to the Purchasing Managers Index (PMI), which has contracted nearly every month for the last two years. This means it’s due for a rebound, as other economic indicators look strong.

While the Gates Foundation can’t create a recovery in the industry, the thinking behind these stock picks makes sense. A return to growth in the freight transportation industry is likely to come in the coming quarters.