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.