1 00:00:00,100 --> 00:00:03,000 We're always looking at the example of great investors to 2 00:00:03,000 --> 00:00:05,200 see what we can learn. And we've highlighted many of 3 00:00:05,200 --> 00:00:08,200 them on this channel. Of course, we have Warren 4 00:00:08,200 --> 00:00:11,200 Buffett and Charlie Munger two of the greatest investors to 5 00:00:11,200 --> 00:00:13,800 ever live. That are very public about their 6 00:00:13,800 --> 00:00:15,900 Investments and they're investing strategy. 7 00:00:16,100 --> 00:00:18,800 We've also gone over Terry Smith, the British investor 8 00:00:18,800 --> 00:00:21,700 running fun Smith, who has a simple investing strategy of 9 00:00:21,800 --> 00:00:24,200 buying. Good companies, not overpaying 10 00:00:24,200 --> 00:00:26,800 and then doing nothing. He's ran his fun to Great 11 00:00:26,800 --> 00:00:29,900 Performances well and Terry Smith like Warren Buffett. 12 00:00:30,000 --> 00:00:33,000 If it is someone that's very public about a strategy. 13 00:00:33,000 --> 00:00:36,400 In fact Terry Smith goes as far to give exact details and 14 00:00:36,400 --> 00:00:40,400 metrics on his specific strategy and he's a great public speaker. 15 00:00:40,400 --> 00:00:42,800 Giving frequent speeches to large audiences. 16 00:00:42,800 --> 00:00:45,800 While there's investors like Terry Smith and Warren Buffett 17 00:00:45,800 --> 00:00:48,600 that are very public with their investing strategy and their 18 00:00:48,600 --> 00:00:50,700 performance. There's other ones that aren't 19 00:00:50,700 --> 00:00:53,000 so public about what they're doing. 20 00:00:53,200 --> 00:00:56,400 In fact, they operate in a shroud of secrecy and mystery. 21 00:00:56,800 --> 00:01:00,700 One of the largest investors to do, this is called Chris home, 22 00:01:00,700 --> 00:01:03,200 Chris home has a name that you likely haven't heard that much 23 00:01:03,200 --> 00:01:06,300 and this is by Design. It's intentional. 24 00:01:06,600 --> 00:01:10,400 Chris Han has tried to keep a low profile, only having a 25 00:01:10,400 --> 00:01:14,200 select few carefully, curated and controlled interviews. 26 00:01:14,200 --> 00:01:17,800 He has, kept himself out of the public light as much as possible 27 00:01:17,900 --> 00:01:20,200 despite being one of the wealthiest people in the world, 28 00:01:20,200 --> 00:01:23,700 with a net worth of nearly seven billion dollars and in one year 29 00:01:23,700 --> 00:01:26,600 paying himself over two million dollars per year. 30 00:01:26,800 --> 00:01:29,800 He's ran his fund, the TCI fund to great success. 31 00:01:29,900 --> 00:01:33,700 Success over the past 20 years. In fact, he's so successful with 32 00:01:33,700 --> 00:01:38,400 this fund that he's beat out both the QQQ and the S&P 500 for 33 00:01:38,400 --> 00:01:43,900 over 20 years having an average annualized return of above 19%. 34 00:01:43,900 --> 00:01:47,200 This puts him in the top category of elite performers, 35 00:01:47,300 --> 00:01:49,800 one of the best performing hedge funds to ever exist. 36 00:01:50,000 --> 00:01:52,700 And even though he's largely kept out of the Public's fear, 37 00:01:52,700 --> 00:01:56,700 he does have great influence. In fact, he's Bragg before about 38 00:01:56,700 --> 00:02:00,300 firing German CEOs of companies, he's authored more Double 39 00:02:00,300 --> 00:02:02,600 letters to Google. Instructing them to fire over, 40 00:02:02,600 --> 00:02:06,000 30,000 employees, and he's partly credited for Google's 41 00:02:06,000 --> 00:02:07,400 recent reduction in their Workforce. 42 00:02:07,400 --> 00:02:10,699 His investment fund has been so successful for such a long 43 00:02:10,699 --> 00:02:13,800 period of time that he now manages around, 30 billion 44 00:02:13,800 --> 00:02:15,200 dollars. And the way that he had 45 00:02:15,200 --> 00:02:17,800 tributes, all of the success, the way that he describes his 46 00:02:17,800 --> 00:02:21,000 investing strategy is he buys strong companies. 47 00:02:21,000 --> 00:02:23,800 So in this episode we're going to try to dive into who Chris 48 00:02:23,800 --> 00:02:26,800 hone really is how is investing strategy has worked. 49 00:02:26,800 --> 00:02:30,800 What is portfolio looks like and what he Means by strong 50 00:02:30,800 --> 00:02:32,900 companies. We're going to be uncovering all 51 00:02:32,900 --> 00:02:34,500 of this so we have a lot to get to. 52 00:02:34,700 --> 00:02:37,300 Let's go ahead and get started now where this journey starts 53 00:02:37,300 --> 00:02:40,400 off with Christopher hone and what he's most notable for is 54 00:02:40,400 --> 00:02:44,700 the TCI fund standing for the children's investment fund. 55 00:02:44,700 --> 00:02:48,300 Most hedge funds charge a fee, which is a percentage of assets 56 00:02:48,300 --> 00:02:51,200 under management that goes to the management team of the fund 57 00:02:51,300 --> 00:02:53,200 and they typically just keep that fee. 58 00:02:53,300 --> 00:02:56,000 But what Chris home decided to do was start one but make it 59 00:02:56,000 --> 00:03:01,300 philanthropic he decided to donate one third of the 1.5% 60 00:03:01,300 --> 00:03:06,500 management fee to see iff ciiff is the children's investment 61 00:03:06,500 --> 00:03:09,500 fund Foundation. A charity specifically set up 62 00:03:09,500 --> 00:03:11,200 for this. The charity goes over a lot of 63 00:03:11,208 --> 00:03:13,900 different priorities from preventing child labor to child 64 00:03:13,900 --> 00:03:16,500 health and development and with this novelty is a part of the 65 00:03:16,500 --> 00:03:18,700 management fee. Going to charity, it was 66 00:03:18,700 --> 00:03:20,900 something that a lot of investors could get behind. 67 00:03:21,100 --> 00:03:24,400 You could now have your money managed by this fund and you 68 00:03:24,400 --> 00:03:27,700 would be doing charity at the same time, helping some children 69 00:03:27,700 --> 00:03:29,800 in need whether or not, this is a marketing scheme. 70 00:03:29,900 --> 00:03:32,500 Or whether or not it was to soften the image of Chris hone, 71 00:03:32,700 --> 00:03:35,100 whatever. It was, it worked after the 72 00:03:35,100 --> 00:03:39,900 first month, January 2004, the fund was already managing around 73 00:03:39,900 --> 00:03:43,500 470 million dollars, even though in total, that's not a very 74 00:03:43,500 --> 00:03:46,100 large hedge fund. That's a very good start after 75 00:03:46,100 --> 00:03:47,700 one month. Now, if we break down to how 76 00:03:47,700 --> 00:03:51,100 this fun, Grew From 400 million dollars to Thirty billion 77 00:03:51,100 --> 00:03:54,400 dollars, it had to do with Chris's incredible performance 78 00:03:54,400 --> 00:03:57,800 and his ability to adapt his style of investing over time. 79 00:03:58,200 --> 00:04:02,100 The one thing that he's always had That constant is he's always 80 00:04:02,100 --> 00:04:05,800 been concentrated. That is number one, many hedge 81 00:04:05,800 --> 00:04:10,700 funds and many funds in general. Hold 20 30 40 plus companies not 82 00:04:10,700 --> 00:04:14,800 Chris hone Kris, hyung is always concentrated into just a handful 83 00:04:15,000 --> 00:04:18,600 of his current best ideas. Normally his fund will hold 84 00:04:18,600 --> 00:04:22,500 anywhere from seven to ten companies with the huge majority 85 00:04:22,500 --> 00:04:24,900 of capital in only a couple of companies. 86 00:04:24,900 --> 00:04:28,800 He said, himself, I've always decided to be concentrated and 87 00:04:28,800 --> 00:04:32,800 he believes that tration is a key element of outperformance. 88 00:04:33,000 --> 00:04:34,900 It's very difficult to outperform. 89 00:04:34,900 --> 00:04:37,400 If you spread your money over, lots of different companies. 90 00:04:37,500 --> 00:04:40,400 Now, outside of concentration, other aspects of is investing 91 00:04:40,400 --> 00:04:43,100 strategy, have adapted and changed over time. 92 00:04:43,100 --> 00:04:45,900 For example, when he first started off, he focused on what 93 00:04:45,900 --> 00:04:48,800 he called. Special situations, unique 94 00:04:48,800 --> 00:04:51,900 situations and companies that he could exploit, or that he could 95 00:04:51,900 --> 00:04:56,600 use to his advantage on day one. He put about 20% of his capital 96 00:04:56,800 --> 00:04:59,800 in the two Korean companies including consumer. 97 00:04:59,900 --> 00:05:02,900 Onyx LG Corp, who stock went up five times. 98 00:05:03,200 --> 00:05:07,000 So he was Off to the Races right at the start 5x thing with this 99 00:05:07,000 --> 00:05:09,600 top holding. He also decided soon after that, 100 00:05:09,600 --> 00:05:13,400 he would step into activism activism is when you use your 101 00:05:13,400 --> 00:05:15,900 influence and control to determine the outcome of a 102 00:05:15,900 --> 00:05:18,800 company, you can change management, you can get seats on 103 00:05:18,800 --> 00:05:21,000 the board. When you have a lot of ownership 104 00:05:21,000 --> 00:05:22,900 of a company, you have a lot of influence. 105 00:05:22,900 --> 00:05:25,600 And he did this with a number of European companies, he was 106 00:05:25,600 --> 00:05:29,700 quickly regarded as an activist investor to fear now from 2004. 107 00:05:29,900 --> 00:05:33,900 To 2007, the first four years of Chris Holmes, TCI fund. 108 00:05:33,900 --> 00:05:35,400 Things could not have been going better. 109 00:05:35,400 --> 00:05:38,400 The returns that he was getting year after year. 110 00:05:38,400 --> 00:05:43,100 After year were unbelievable, 30, to 50 percent returns for 111 00:05:43,100 --> 00:05:47,500 the first four years of TCI. The average annualized return 112 00:05:47,500 --> 00:05:50,300 was 40%. He was compounding his wealth at 113 00:05:50,300 --> 00:05:53,300 an incredible rate and never feeling better doing so. 114 00:05:53,300 --> 00:05:56,800 But the fortunes quickly change for Chris hone, the financial 115 00:05:56,800 --> 00:05:59,700 crisis wreaked, havoc on the global markets TCI. 116 00:05:59,900 --> 00:06:03,800 Lost forty three percent that year home, blame the Steep 117 00:06:03,800 --> 00:06:07,400 decline on being long equities which went down in line with the 118 00:06:07,400 --> 00:06:10,100 rest of the market. So after four years of Stellar 119 00:06:10,100 --> 00:06:14,600 performance now has fund was chopped nearly in half down, 43% 120 00:06:14,800 --> 00:06:18,000 and worse. Yet was the slow recovery of TCI 121 00:06:18,000 --> 00:06:22,200 Fund in 2009 as the market recovered in the S&P 500 surged. 122 00:06:22,200 --> 00:06:27,600 26% PCI was up only 10% hone attributed, the under 123 00:06:27,600 --> 00:06:30,800 performance of the funds all. But shut Down risk. 124 00:06:30,800 --> 00:06:33,400 He followed that disappointing Gear with gains of just nine 125 00:06:33,400 --> 00:06:38,200 percent and seven percent in 2010 and 2011 respectively, he 126 00:06:38,207 --> 00:06:40,500 had trailed the market for the past three years and the 127 00:06:40,500 --> 00:06:43,100 investors in his fund were losing confidence in his 128 00:06:43,100 --> 00:06:45,300 ability. To actually have good returns, 129 00:06:45,600 --> 00:06:49,300 maybe it was just a fluke, the first four years, maybe he's not 130 00:06:49,300 --> 00:06:53,000 able to do that ever again, the Redemption started to come in 131 00:06:53,100 --> 00:06:56,400 investors, started to leave his fund after their five-year 132 00:06:56,400 --> 00:06:58,800 lockup period. In fact, the assets under 133 00:06:58,800 --> 00:07:02,800 management went 20 billion all the way back down to four point, 134 00:07:02,800 --> 00:07:05,300 nine billion. So investors in is fun, pulled 135 00:07:05,300 --> 00:07:09,000 out the huge majority of Assets. In fact, not only were investors 136 00:07:09,000 --> 00:07:11,400 leaving, but his own analysts were starting to leave. 137 00:07:11,400 --> 00:07:12,600 They had given up on the company. 138 00:07:12,600 --> 00:07:16,500 TCI itself around 2012. Christopher home was not having 139 00:07:16,500 --> 00:07:19,500 a great time even though his fund had good performance that 140 00:07:19,500 --> 00:07:24,100 year posting 29.5%, he realized that it's time to change gears 141 00:07:24,100 --> 00:07:27,300 and make sure that this performance can continue for the 142 00:07:27,300 --> 00:07:29,300 long term. He described this as having a 143 00:07:29,308 --> 00:07:31,000 huge way. Wake-up call and rather than 144 00:07:31,000 --> 00:07:33,700 doubling down on the previous method of investing. 145 00:07:33,700 --> 00:07:35,500 He decided to change the game plan. 146 00:07:35,500 --> 00:07:38,200 He gave his investing strategy, a complete makeover. 147 00:07:38,300 --> 00:07:41,100 The first thing was he abandoned the strategy of looking for 148 00:07:41,100 --> 00:07:44,500 special situations. These disjointed stocks that he 149 00:07:44,500 --> 00:07:47,300 could try to come in and prove things, he got rid of that 150 00:07:47,300 --> 00:07:50,300 strategy and in his words he would not be investing and week 151 00:07:50,300 --> 00:07:52,900 businesses. Such as manufacturers Chris was 152 00:07:52,900 --> 00:07:55,800 in the works of making a dramatic Dynamic shift in his 153 00:07:55,800 --> 00:07:58,100 investing strategy. The only thing that would be 154 00:07:58,100 --> 00:08:01,500 held constant is you would Have a concentrated portfolio. 155 00:08:01,800 --> 00:08:05,600 But this time, his concentrated portfolio would be of companies 156 00:08:05,600 --> 00:08:07,900 that he considers to be monopolies. 157 00:08:07,900 --> 00:08:10,200 His investing strategy would be moving from week. 158 00:08:10,200 --> 00:08:13,500 Companies to concentrating heavily into monopolies 159 00:08:13,500 --> 00:08:16,300 monopolies as Chris describes, our companies that are in 160 00:08:16,300 --> 00:08:19,300 concentrated Industries, with a large moats, High barriers to 161 00:08:19,300 --> 00:08:21,500 entry and very strong pricing power. 162 00:08:21,600 --> 00:08:24,000 He looked for these companies everywhere and he found them in 163 00:08:24,000 --> 00:08:26,200 many different places. Some of them were media 164 00:08:26,200 --> 00:08:29,600 companies like News, Corp, 21st Century, Fox and Comcast. 165 00:08:29,800 --> 00:08:32,900 Whatever industry they were in, whatever they were doing, they 166 00:08:32,900 --> 00:08:36,600 all had commonalities, they rarely manufactured products. 167 00:08:36,600 --> 00:08:38,600 They rarely had lots of competition. 168 00:08:38,799 --> 00:08:42,100 Most of them were these high barrier entry companies over the 169 00:08:42,100 --> 00:08:43,900 years. His portfolio, morphed into 170 00:08:43,900 --> 00:08:47,300 this, highly concentrated monopolistic portfolio at the 171 00:08:47,300 --> 00:08:53,400 end of 2021 TCI held just 13 13 different stocks with its forty 172 00:08:53,400 --> 00:08:56,600 four billion dollar u.s. listed stock portfolio. 173 00:08:56,700 --> 00:09:00,400 It's five largest Holdings. Accounted for Of the assets 174 00:09:00,400 --> 00:09:03,400 under management. So he has over 20 billion 175 00:09:03,400 --> 00:09:06,300 dollars in just five companies and all of which were these 176 00:09:06,300 --> 00:09:09,300 monopolistic dominant companies. In fact if we look at Chris 177 00:09:09,300 --> 00:09:12,400 Holmes portfolio over the years, these are the type of names that 178 00:09:12,400 --> 00:09:14,200 he's been in over the past 10 years. 179 00:09:14,200 --> 00:09:15,900 That's given him such good success. 180 00:09:16,100 --> 00:09:19,800 He has companies like Microsoft. These are not Hardware makers as 181 00:09:19,800 --> 00:09:21,200 much as they are software makers. 182 00:09:21,500 --> 00:09:24,300 He likes the companies that can sell something repeatedly 183 00:09:24,500 --> 00:09:26,600 without having to worry about manufacturing. 184 00:09:26,600 --> 00:09:29,300 Microsoft and Google have been two of his largest positions. 185 00:09:29,800 --> 00:09:32,800 Another one is Visa. He has a massive concentrated 186 00:09:32,800 --> 00:09:35,200 position into Visa the payment processor. 187 00:09:35,500 --> 00:09:38,200 All of these companies are monopolistic to some degree. 188 00:09:38,500 --> 00:09:42,000 Another one is Canadian National Railway Canadian Pacific and 189 00:09:42,000 --> 00:09:44,400 Union Pacific. He swapped out different 190 00:09:44,400 --> 00:09:47,300 railroads over time but he's a big investor in the class 1, 191 00:09:47,300 --> 00:09:51,100 railroads, these typically take up around 30% of his portfolio. 192 00:09:51,400 --> 00:09:55,000 He also likes the credit rating agencies SP Global and Moody's 193 00:09:55,000 --> 00:09:58,400 has occupied roughly 20% of his portfolio, for the past 10 194 00:09:58,400 --> 00:09:59,600 years. Every one of these. 195 00:09:59,800 --> 00:10:02,300 Benny's operates in different categories with different 196 00:10:02,300 --> 00:10:04,600 competitors but they also have commonalities. 197 00:10:04,900 --> 00:10:08,400 They are highly monopolistic. Dominant companies with deeply 198 00:10:08,400 --> 00:10:12,000 entrenched Market positions that have ample pricing power, and 199 00:10:12,000 --> 00:10:15,100 long runways of growth. These are as he describes strong 200 00:10:15,100 --> 00:10:18,400 companies, the results of which have clearly paid off since 201 00:10:18,400 --> 00:10:21,100 2008. TCI fund has only had one year 202 00:10:21,100 --> 00:10:23,700 that went - and that was in 2022. 203 00:10:23,900 --> 00:10:27,100 When the fun went down, 18 percent, the previous 13 years 204 00:10:27,100 --> 00:10:31,100 were all consecutive games with many of them being Of 20%, in 205 00:10:31,100 --> 00:10:33,500 fact his fund since its lifetime has. 206 00:10:33,500 --> 00:10:36,400 Now, average above 19 percent per year. 207 00:10:36,400 --> 00:10:38,800 And based on his current portfolio, he's also been having 208 00:10:38,800 --> 00:10:40,600 an incredibly good performance this year. 209 00:10:40,900 --> 00:10:42,500 So who is Chris home? Really? 210 00:10:42,800 --> 00:10:45,800 Right now, he's a bit of a mysterious person that buys 211 00:10:45,800 --> 00:10:48,900 companies that aren't just strong companies but their 212 00:10:48,900 --> 00:10:51,000 monopolies. So for me, personally, I'm 213 00:10:51,000 --> 00:10:53,100 currently drawn to Kristen strategy. 214 00:10:53,300 --> 00:10:55,700 I think it's phenomenal. And I think that is returns 215 00:10:55,700 --> 00:10:59,300 prove that it's a good strategy, both in good times and bad 216 00:10:59,300 --> 00:11:01,500 times. And many of the Holdings that he 217 00:11:01,500 --> 00:11:05,400 outlines as monopolies, I fully agree on his top holding 218 00:11:05,400 --> 00:11:09,200 currently being Microsoft which is also one of my large core 219 00:11:09,200 --> 00:11:12,500 concentrated positions that I've held for over five years. 220 00:11:12,600 --> 00:11:15,900 Microsoft, I believe is a monopoly company with very high 221 00:11:15,900 --> 00:11:18,600 barriers to entry. Chris owns Canadian Pacific and 222 00:11:18,600 --> 00:11:20,500 he's own Union Pacific in the past. 223 00:11:20,600 --> 00:11:24,300 These companies, I also believe are very monopolistic and they 224 00:11:24,300 --> 00:11:26,900 haven't had a bid this year but I think that will change in the 225 00:11:26,900 --> 00:11:29,600 future. They generate consistent growing 226 00:11:29,800 --> 00:11:32,300 We cash flow per share. Chris, and I also share a love 227 00:11:32,300 --> 00:11:35,000 for the credit rating and credit processing business. 228 00:11:35,200 --> 00:11:39,200 He owns SP Global and Visa even though Visa Mastercard are two 229 00:11:39,200 --> 00:11:41,500 different companies. They operate with very similar 230 00:11:41,500 --> 00:11:46,000 modes, and SP Global and Moody's are a duopoly in their category, 231 00:11:46,000 --> 00:11:48,900 I do own companies outside of the ones that he would consider 232 00:11:48,900 --> 00:11:51,300 monopolies speech. He's not really a monopolistic 233 00:11:51,300 --> 00:11:53,400 company in the same sense that he looks at. 234 00:11:53,400 --> 00:11:56,000 Neither a companies, like, Texas Roadhouse or Starbucks. 235 00:11:56,000 --> 00:11:58,700 These are companies that have very intense competition, so I'm 236 00:11:58,700 --> 00:12:01,300 not 100%. Pure with the monopolistic 237 00:12:01,300 --> 00:12:05,100 strategy, but I am gravitating towards that direction when I'm 238 00:12:05,100 --> 00:12:08,500 doing research on new companies and adding a new franchises to 239 00:12:08,500 --> 00:12:11,900 my portfolio, I'm looking for ones that have incredibly High 240 00:12:11,900 --> 00:12:15,000 barriers to entry and that have some sense of them that are 241 00:12:15,000 --> 00:12:18,200 monopolistic because I think that is the best way to protect 242 00:12:18,200 --> 00:12:22,000 your portfolio from the hardship of time that capitalism brings. 243 00:12:22,200 --> 00:12:24,700 So, if you're researching Warren Buffett or you're reading about 244 00:12:24,700 --> 00:12:27,100 Terry Smith, another investor that I don't think you should 245 00:12:27,100 --> 00:12:30,300 forget, is Chris home. He's not nearly as as public. 246 00:12:30,300 --> 00:12:32,700 So there's not as much being written about them or said about 247 00:12:32,700 --> 00:12:36,300 them, but is investing strategy, in my opinion, is incredibly 248 00:12:36,300 --> 00:12:38,100 strong. Now, that's all for this 249 00:12:38,100 --> 00:12:39,500 episode. I hope you enjoyed. 250 00:12:39,500 --> 00:12:41,800 If you want more content like this, be sure to subscribe to 251 00:12:41,800 --> 00:12:43,600 the channel, and I'll see you in the next one.