You know the old saying, “the rich get richer…” Well, when it comes to Bill Gates, it surely is true.

He amassed a multi-billion dollar fortune when he ran Microsoft Corp. (Nasdaq: MSFT), and he’s making a lot more money through his two investment firms, Cascade Investments and the Bill & Melinda Gates Foundation Trust. (Credit also goes to a savvy right-hand man, Michael Larson, who by one recent account, has helped Gates grow his post-Microsoft nest egg to $82 billion from $5 billion.)

That’s why so many investors track the ongoing portfolio moves by Gates, Larson and their team. Simply following in their wake can help generate solid portfolio gains. But there’s a catch. These folks don’t make short-term trades, they make long-term investments. I profiled that approach a few years ago as Gates and his team kept buying shares of AutoNation, Inc. (NYSE: AN), even as shares repeatedly hit new highs.

In an ideal world, you can find a stock that Bill Gates loves, and buy it for a lower price than even the tech legend paid. And we found a stock that fits the bill: It’s fallen in value since Gates bought shares, but holds tremendous long-term appeal. Its name is Spanish for “Golden Arches.” Arcos Dorados Holdings, Inc. (Nasdaq: ARCO) is Latin America’s largest operator of McDonald’s franchises.

Red Flags Galore
At this point, there are likely some alarm bells ringing in your head. A quick glance at the stock chart suggests that this company has completely failed to deliver the results that investors expect. Indeed the company has lagged quarterly profit forecasts throughout 2014.

There is also a great deal of buzz right now that the McDonalds’ brand is badly tarnished. Mickey D’s global same store sales may actually turn negative this year. Partial blame goes to ongoing economic stress around the world, as consumers pinch pennies. Another dose of blame goes to McDonalds’ management, which has created few new hits in recent years. If history is any guide, then management will embark on a massive self-examination and, as has been the case in the past, will emerge stronger, with a more compelling product line-up when the shakeup is complete.

#-ad_banner-#But that’s not why Bill Gates established (and has since maintained) a starter position in Arcos Dorados earlier this year. Instead, his reasoning lies in a massive demographic shift taking place south of the equator and the historical role Mickey D’s plays in such economic shifts.

A Pause Before The Next Bulge
When the World Bank looked at the Latin American middle class in 2012, it concluded that the demographic grew 50% in just a decade. That mirrors the kind of boom the United States saw in the decade following World War II. Back then, McDonalds started to gain traction as consumers finally had enough spare cash to take the whole family out for burgers and shakes. At the time of the World Bank analysis in 2012, shares of Arcos Dorados traded above $20.

Since 2012, emerging market economies in Latin America and elsewhere have felt deepening stress, as a drop in commodity prices in places like Chile and surging inflation in places like Brazil, have led consumers to become thrifty. And you can see the economic slowdown’s impact on Arcos Dorados’ financial results. The company’s revenue, which grew at a 15-20% clip in 2010 and 2011, is expected to turn negative this year. (Some of that is due to currency effects and trouble at the company’s Venezuelan operations.)

Management has decided to suspend the dividend, while taking steps to enhance EBITDA (earnings before interest, taxes, depreciation and amortization), which is likely to fall to around $250 million this year. Analysts expect EBITDA to rebound 10% next year and move back up to $300 million in 2016. Shares are now valued at around seven times that projected 2016 EBITDA (on an enterprise value basis). That multiple is sharply compressed from the double-digit EBITDA multiples this stock sported several years ago.

Risks To Consider: To fuel growth, Arcos Dorados borrowed heavily. Management will need to maintain EBITDA at least at current levels in order to remain compliant with debt covenants. If not, the company may need to restructure its debt.

Action To Take –> Bill Gates didn’t buy this stock because it is cheap. As noted earlier, he looks for stocks that have great long-term potential, thanks to his buy-and-hold strategy. And the near-term headwinds, for both McDonalds, in general, and Arcos Dorados, in particular, will start to recede as Latin America’s emerging middle class sheds the current sense of caution. To be sure, few catalysts exist to push this stock much higher quickly (short of a buyout). Instead, this is a classic example of a good business model in the midst of a very bad stretch. Powerful demographics and McDonalds’ enduring brand should help this stock move well past Bill Gates’ $9.62 a share buy-in price. The key is to have patience and let the current clouds pass.

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