We're always looking at the example of great investors to
see what we can learn. And we've highlighted many of
them on this channel. Of course, we have Warren
Buffett and Charlie Munger two of the greatest investors to
ever live. That are very public about their
Investments and they're investing strategy.
We've also gone over Terry Smith, the British investor
running fun Smith, who has a simple investing strategy of
buying. Good companies, not overpaying
and then doing nothing. He's ran his fun to Great
Performances well and Terry Smith like Warren Buffett.
If it is someone that's very public about a strategy.
In fact Terry Smith goes as far to give exact details and
metrics on his specific strategy and he's a great public speaker.
Giving frequent speeches to large audiences.
While there's investors like Terry Smith and Warren Buffett
that are very public with their investing strategy and their
performance. There's other ones that aren't
so public about what they're doing.
In fact, they operate in a shroud of secrecy and mystery.
One of the largest investors to do, this is called Chris home,
Chris home has a name that you likely haven't heard that much
and this is by Design. It's intentional.
Chris Han has tried to keep a low profile, only having a
select few carefully, curated and controlled interviews.
He has, kept himself out of the public light as much as possible
despite being one of the wealthiest people in the world,
with a net worth of nearly seven billion dollars and in one year
paying himself over two million dollars per year.
He's ran his fund, the TCI fund to great success.
Success over the past 20 years. In fact, he's so successful with
this fund that he's beat out both the QQQ and the S&P 500 for
over 20 years having an average annualized return of above 19%.
This puts him in the top category of elite performers,
one of the best performing hedge funds to ever exist.
And even though he's largely kept out of the Public's fear,
he does have great influence. In fact, he's Bragg before about
firing German CEOs of companies, he's authored more Double
letters to Google. Instructing them to fire over,
30,000 employees, and he's partly credited for Google's
recent reduction in their Workforce.
His investment fund has been so successful for such a long
period of time that he now manages around, 30 billion
dollars. And the way that he had
tributes, all of the success, the way that he describes his
investing strategy is he buys strong companies.
So in this episode we're going to try to dive into who Chris
hone really is how is investing strategy has worked.
What is portfolio looks like and what he Means by strong
companies. We're going to be uncovering all
of this so we have a lot to get to.
Let's go ahead and get started now where this journey starts
off with Christopher hone and what he's most notable for is
the TCI fund standing for the children's investment fund.
Most hedge funds charge a fee, which is a percentage of assets
under management that goes to the management team of the fund
and they typically just keep that fee.
But what Chris home decided to do was start one but make it
philanthropic he decided to donate one third of the 1.5%
management fee to see iff ciiff is the children's investment
fund Foundation. A charity specifically set up
for this. The charity goes over a lot of
different priorities from preventing child labor to child
health and development and with this novelty is a part of the
management fee. Going to charity, it was
something that a lot of investors could get behind.
You could now have your money managed by this fund and you
would be doing charity at the same time, helping some children
in need whether or not, this is a marketing scheme.
Or whether or not it was to soften the image of Chris hone,
whatever. It was, it worked after the
first month, January 2004, the fund was already managing around
470 million dollars, even though in total, that's not a very
large hedge fund. That's a very good start after
one month. Now, if we break down to how
this fun, Grew From 400 million dollars to Thirty billion
dollars, it had to do with Chris's incredible performance
and his ability to adapt his style of investing over time.
The one thing that he's always had That constant is he's always
been concentrated. That is number one, many hedge
funds and many funds in general. Hold 20 30 40 plus companies not
Chris hone Kris, hyung is always concentrated into just a handful
of his current best ideas. Normally his fund will hold
anywhere from seven to ten companies with the huge majority
of capital in only a couple of companies.
He said, himself, I've always decided to be concentrated and
he believes that tration is a key element of outperformance.
It's very difficult to outperform.
If you spread your money over, lots of different companies.
Now, outside of concentration, other aspects of is investing
strategy, have adapted and changed over time.
For example, when he first started off, he focused on what
he called. Special situations, unique
situations and companies that he could exploit, or that he could
use to his advantage on day one. He put about 20% of his capital
in the two Korean companies including consumer.
Onyx LG Corp, who stock went up five times.
So he was Off to the Races right at the start 5x thing with this
top holding. He also decided soon after that,
he would step into activism activism is when you use your
influence and control to determine the outcome of a
company, you can change management, you can get seats on
the board. When you have a lot of ownership
of a company, you have a lot of influence.
And he did this with a number of European companies, he was
quickly regarded as an activist investor to fear now from 2004.
To 2007, the first four years of Chris Holmes, TCI fund.
Things could not have been going better.
The returns that he was getting year after year.
After year were unbelievable, 30, to 50 percent returns for
the first four years of TCI. The average annualized return
was 40%. He was compounding his wealth at
an incredible rate and never feeling better doing so.
But the fortunes quickly change for Chris hone, the financial
crisis wreaked, havoc on the global markets TCI.
Lost forty three percent that year home, blame the Steep
decline on being long equities which went down in line with the
rest of the market. So after four years of Stellar
performance now has fund was chopped nearly in half down, 43%
and worse. Yet was the slow recovery of TCI
Fund in 2009 as the market recovered in the S&P 500 surged.
26% PCI was up only 10% hone attributed, the under
performance of the funds all. But shut Down risk.
He followed that disappointing Gear with gains of just nine
percent and seven percent in 2010 and 2011 respectively, he
had trailed the market for the past three years and the
investors in his fund were losing confidence in his
ability. To actually have good returns,
maybe it was just a fluke, the first four years, maybe he's not
able to do that ever again, the Redemption started to come in
investors, started to leave his fund after their five-year
lockup period. In fact, the assets under
management went 20 billion all the way back down to four point,
nine billion. So investors in is fun, pulled
out the huge majority of Assets. In fact, not only were investors
leaving, but his own analysts were starting to leave.
They had given up on the company.
TCI itself around 2012. Christopher home was not having
a great time even though his fund had good performance that
year posting 29.5%, he realized that it's time to change gears
and make sure that this performance can continue for the
long term. He described this as having a
huge way. Wake-up call and rather than
doubling down on the previous method of investing.
He decided to change the game plan.
He gave his investing strategy, a complete makeover.
The first thing was he abandoned the strategy of looking for
special situations. These disjointed stocks that he
could try to come in and prove things, he got rid of that
strategy and in his words he would not be investing and week
businesses. Such as manufacturers Chris was
in the works of making a dramatic Dynamic shift in his
investing strategy. The only thing that would be
held constant is you would Have a concentrated portfolio.
But this time, his concentrated portfolio would be of companies
that he considers to be monopolies.
His investing strategy would be moving from week.
Companies to concentrating heavily into monopolies
monopolies as Chris describes, our companies that are in
concentrated Industries, with a large moats, High barriers to
entry and very strong pricing power.
He looked for these companies everywhere and he found them in
many different places. Some of them were media
companies like News, Corp, 21st Century, Fox and Comcast.
Whatever industry they were in, whatever they were doing, they
all had commonalities, they rarely manufactured products.
They rarely had lots of competition.
Most of them were these high barrier entry companies over the
years. His portfolio, morphed into
this, highly concentrated monopolistic portfolio at the
end of 2021 TCI held just 13 13 different stocks with its forty
four billion dollar u.s. listed stock portfolio.
It's five largest Holdings. Accounted for Of the assets
under management. So he has over 20 billion
dollars in just five companies and all of which were these
monopolistic dominant companies. In fact if we look at Chris
Holmes portfolio over the years, these are the type of names that
he's been in over the past 10 years.
That's given him such good success.
He has companies like Microsoft. These are not Hardware makers as
much as they are software makers.
He likes the companies that can sell something repeatedly
without having to worry about manufacturing.
Microsoft and Google have been two of his largest positions.
Another one is Visa. He has a massive concentrated
position into Visa the payment processor.
All of these companies are monopolistic to some degree.
Another one is Canadian National Railway Canadian Pacific and
Union Pacific. He swapped out different
railroads over time but he's a big investor in the class 1,
railroads, these typically take up around 30% of his portfolio.
He also likes the credit rating agencies SP Global and Moody's
has occupied roughly 20% of his portfolio, for the past 10
years. Every one of these.
Benny's operates in different categories with different
competitors but they also have commonalities.
They are highly monopolistic. Dominant companies with deeply
entrenched Market positions that have ample pricing power, and
long runways of growth. These are as he describes strong
companies, the results of which have clearly paid off since
2008. TCI fund has only had one year
that went - and that was in 2022.
When the fun went down, 18 percent, the previous 13 years
were all consecutive games with many of them being Of 20%, in
fact his fund since its lifetime has.
Now, average above 19 percent per year.
And based on his current portfolio, he's also been having
an incredibly good performance this year.
So who is Chris home? Really?
Right now, he's a bit of a mysterious person that buys
companies that aren't just strong companies but their
monopolies. So for me, personally, I'm
currently drawn to Kristen strategy.
I think it's phenomenal. And I think that is returns
prove that it's a good strategy, both in good times and bad
times. And many of the Holdings that he
outlines as monopolies, I fully agree on his top holding
currently being Microsoft which is also one of my large core
concentrated positions that I've held for over five years.
Microsoft, I believe is a monopoly company with very high
barriers to entry. Chris owns Canadian Pacific and
he's own Union Pacific in the past.
These companies, I also believe are very monopolistic and they
haven't had a bid this year but I think that will change in the
future. They generate consistent growing
We cash flow per share. Chris, and I also share a love
for the credit rating and credit processing business.
He owns SP Global and Visa even though Visa Mastercard are two
different companies. They operate with very similar
modes, and SP Global and Moody's are a duopoly in their category,
I do own companies outside of the ones that he would consider
monopolies speech. He's not really a monopolistic
company in the same sense that he looks at.
Neither a companies, like, Texas Roadhouse or Starbucks.
These are companies that have very intense competition, so I'm
not 100%. Pure with the monopolistic
strategy, but I am gravitating towards that direction when I'm
doing research on new companies and adding a new franchises to
my portfolio, I'm looking for ones that have incredibly High
barriers to entry and that have some sense of them that are
monopolistic because I think that is the best way to protect
your portfolio from the hardship of time that capitalism brings.
So, if you're researching Warren Buffett or you're reading about
Terry Smith, another investor that I don't think you should
forget, is Chris home. He's not nearly as as public.
So there's not as much being written about them or said about
them, but is investing strategy, in my opinion, is incredibly
strong. Now, that's all for this
episode. I hope you enjoyed.
If you want more content like this, be sure to subscribe to
the channel, and I'll see you in the next one.