In this article, we present the list of top 10 stock picks of billionaire Chris Hohn’s TCI Fund Management at the end of the second quarter.
Billionaire Sir Chris Hohn is the founder of The Children’s Investment, or TCI Fund Management, a London-based hedge fund. Mr. Hohn was born in 1966 in Addlestone, Surrey, in a working-class family. His father was a car mechanic, and his mother was a legal secretary. He graduated with a first-class honours degree in accounting and business economics from the University of Southampton. On being advised by one of his tutors at the University of Southampton, Mr. Hohn applied to the Harvard Business School (HBS) for an MBA. At HBS, he graduated among the top 5% of his batch, becoming one of the Baker Scholars, the institution’s highest award for academic achievement. He worked at multiple noted PE and hedge funds in New York and London for a few years before setting up TCI Fund Management in 2003.
TCI takes a long-term, value-oriented approach while investing and strongly focuses on environmental, social and governance issues. It is one of the largest hedge funds in the world, with over $50 billion in assets under management.
Mr. Hohn is also a well-known philanthropist, having donated billions of dollars to charitable causes over the years. He is a founder and major supporter of the Children’s Investment Fund Foundation, a UK-based charity that works to improve the lives of children in developing countries. He has also given large sums of money to educational causes and environmental causes.
Mr. Hohn is well known on Wall Street and in the financial center of London for his aggressive negotiating style. He has been involved in a number of high-profile battles with companies, including a successful campaign to force the reform of the London Stock Exchange. He is also a passionate supporter of greater disclosure of information by companies and has been critical of the way in which some banks have operated in the past.
For his philanthropic contributions, Mr. Hohn was knighted in 2014. The Children’s Investment Fund Management has generated strong returns since it was founded. In 2021, the fund generated a return of 23.3% for its investors, making it the sixth of the past seven years when TCI reported double-digit gains.
TCI Fund Management’s Portfolio
The value of TCI Fund Management’s 13F portfolio declined to $31.6 billion at the end of Q2 from $36.84 billion at the end of March. Because the fund has always run a concentrated portfolio, there was not much churning seen in TCI Fund Management’s portfolio during Q2.
Alphabet Inc. (NASDAQ:GOOG), Canadian National Railway Company (NYSE:CNI), and Visa Inc. (NYSE:V) continued to be among TCI Fund Management’s top 10 stock picks at the end of Q2 when compared to the previous quarter.
Chris Hohn
Our Methodology
At Insider Monkey, we cover the portfolios of 895 hedge funds, closely tracking the stocks they buy and sell. We selected the ten stocks discussed in this article based on the 13F regulatory filing submitted by TCI Fund Management with the SEC for the quarter ending June 30. These are the top ten picks of Hohn’s fund, according to its second quarter portfolio.
10 Best Stocks to Buy According to Billionaire Chris Hohn
10. Applied Materials, Inc. (NASDAQ:AMAT)
TCI Fund Management’s Stake Value: $172,633,000
Percentage of TCI Fund Management’s 13F Portfolio: 0.54%
Number of Hedge Fund Holders: 67
Applied Materials, Inc. (NASDAQ:AMAT) was the only stock among its top stock picks in which TCI Fund Management initiated a new stake during Q2. Founded in 1967, Applied Materials, Inc. (NASDAQ:AMAT) is among the largest semiconductor equipment manufacturers in the world. Due to macro uncertainty and supply chain issues the semiconductor industry has been facing in the last few quarters, Applied Materials, Inc. (NASDAQ:AMAT) recently got featured in Insider Monkey’s list of 5 Semiconductor Stocks to Watch as Uncertainty Grows.
One of the major reasons TCI Fund Management decided to buy the stock during the second quarter could be the drastic decline it has suffered this year. Having lost close to 48% of its value year-to-date, Applied Materials, Inc.’s (NASDAQ:AMAT) stock currently trades at a forward price to earnings multiple of only 10.95.
On September 28, analysts at Barclays reiterated their ‘Equal Weight’ rating on the stock while reducing their price target to $85 from $95, which represents almost no potential upside from where the stock is currently trading.
9. Boston Properties, Inc. (NYSE:BXP)
TCI Fund Management’s Stake Value: $940,029,000
Percentage of TCI Fund Management’s 13F Portfolio: 2.97%
Number of Hedge Fund Holders: 32
Although TCI Fund Management reduced its stake in Boston Properties, Inc. (NYSE:BXP) by 10% during the second quarter, the stock’s popularity among smart money investors saw a massive jump during that time. From just 21 hedge funds among those covered by Insider Monkey that reported a stake in Boston Properties, Inc. (NYSE:BXP) at the end of March, the number jumped to 32 at the end of June. Funds that initiated a stake in the company during the second quarter included billionaire Jim Simons’ Renaissance Technologies, Ken Heebner’s Capital Growth Management, and Jinghua Yan’s TwinBeech Capital.
Boston Properties, Inc. (NYSE:BXP), as the name suggests, is based in Boston, Massachusetts and is currently the country’s largest publicly-held developer and owner of Class A office properties. It focuses on five major property markets in the country: Boston, Los Angeles, San Francisco, New York and Washington, DC. On September 20, Boston Properties, Inc. (NYSE:BXP) announced that it had acquired a six-story life sciences property with a total area of 271,000 square feet adjacent to Kendall Center from Biogen Inc. (NASDAQ:BIIB). The gross purchase price of this deal was around $592 million, and Biogen has leased the property back from Boston Properties, Inc. (NYSE:BXP) and will continue to occupy the premise until April 2028.
8. Union Pacific Corporation (NYSE:UNP)
TCI Fund Management’s Stake Value: $1,120,178,000
Percentage of TCI Fund Management’s 13F Portfolio: 3.54%
Number of Hedge Fund Holders: 65
Railroad major Union Pacific Corporation’s (NYSE:UNP) stock seems to be following the trajectory of a roller coaster this year. Having started the year near the $200 level, it reached its lifetime high of $278.94 in May, but has pared all that gain as it currently trades flat year-to-date. Why following smart money can reap rich rewards for ordinary investors can be gauged from how smart money has played this stock. Between mid-2017 and the first quarter of this year, when the stock rose from $100 levels to $250 levels, hedge funds tracked by Insider Monkey that reported a stake in Union Pacific Corporation (NYSE:UNP) climbed from 49 to 90. However, that number fell all the way down to 65 in just one quarter.
On September 15, executives at Union Pacific Corporation (NYSE:UNP) and other railroad majors breathed a sigh of relief. After many months of negotiations, US railway workers and companies finally reached an agreement averting a potential strike that could have caused another logistical nightmare like what we saw post-COVID. Out of the 19 analysts on Wall Street who currently cover Union Pacific Corporation (NYSE:UNP) 12 have a ‘Hold’ rating on it with a consensus price target of $243.57, implying a 22.6% potential upside from the stock’s last closing price.
7. Moody’s Corporation (NYSE:MCO)
TCI Fund Management’s Stake Value: $2,242,721,000
Percentage of TCI Fund Management’s 13F Portfolio: 7.09%
Number of Hedge Fund Holders: 48
Moody’s Corporation (NYSE:MCO) is the oldest stock pick of TCI Fund Management that still finds a presence in the fund’s 13F portfolio. TCI Fund Management had first reported initiating a stake in the ratings and analysis company in a regulatory filing for the last quarter of 2012. During Q2, TCI Fund Management upped its stake in Moody’s Corporation (NYSE:MCO) by 14%. Other funds covered by us that also increased their holdings in the company during the same period included billionaire D. E. Shaw’s fund D E Shaw, which boosted its stake by 166% to 60,674 shares, and Dev Kantesaria’s Valley Forge Capital, which upped its holdings by 8% to 1.16 million shares.
For its third quarter of the fiscal year 2023, Moody’s Corporation (NYSE:MCO) is scheduled to report its earnings on October 28. The current consensus among analysts is that the company would declare a GAAP EPS of $1.94 on revenue of $1.4 billion for that period. On September 27, analysts at Morgan Stanley reiterated their ‘Equal Weight’ rating on the stock while upping their price target on it slightly to $288 from $283, representing a potential upside of 16.8% from the stock’s last closing price.
6. S&P Global Inc. (NYSE:SPGI)
TCI Fund Management’s Stake Value: $2,955,450,000
Percentage of TCI Fund Management’s 13F Portfolio: 9.35%
Number of Hedge Fund Holders: 84
Like Moody’s Corporation (NYSE:MCO), S&P Global Inc. (NYSE:SPGI) is another stock in which TCI Fund Management has held a stake for a long time and boosted its holding further – by 29% – during the second quarter. Moody’s Corporation (NYSE:MCO) and S&P Global Inc. (NYSE:SPGI) have been among the most consistent compounding stocks over the past several years. However, among funds tracked by Insider Monkey, S&P Global Inc. (NYSE:SPGI) ranks way ahead in popularity when compared to Moody’s Corporation (NYSE:MCO).
In its second quarter investors letter published recently, Investment management company Ave Maria had this to say about S&P Global Inc. (NYSE:SPGI):
“S&P Global Inc. (NYSE:SPGI) is a data-driven financial services company with leading franchises in the areas of data and analytics, credit rating, commodity insights and indices. S&P Global benefits from several secular trends including the disintermediation of banks, a shift to passive investing, and an increased focus on ESG, Climate & Energy Transition.”
5. Canadian Pacific Railway Limited (NYSE:CP)
TCI Fund Management’s Stake Value: $3,901,375,000
Percentage of TCI Fund Management’s 13F Portfolio: 12.34%
Number of Hedge Fund Holders: 42
Despite the 25% correction in S&P500 this year, shares of Canadian Pacific Railway Limited (NYSE:CP) are still holding strong and have barely lost 4% of their value this year. However, its popularity among smart money investors has decreased significantly from last year. Among the funds tracked by Insider Monkey, 42 disclosed a stake in the railroad company at the end of June, down 15 from 57 at the end of 2021. Funds that sold their entire stake in Canadian Pacific Railway Limited (NYSE:CP) during the second quarter included David Harding’s Winton Capital Management, Ben Gambill’s Tiger Eye Capital, and Jonathan Esfandi’s JNE Partners.
4. Visa Inc. (NYSE:V)
TCI Fund Management’s Stake Value: $3,922,860,000
Percentage of TCI Fund Management’s 13F Portfolio: 12.41%
Number of Hedge Fund Holders: 166
Visa Inc.’s (NYSE:V) popularity has seen a consistent rise among investors over the past several years. And, even though the stock has gone nowhere in the last two years, hedge funds continue to show confidence in the stock. At the end of June, Visa Inc. (NYSE:V) was the 5th most popular stock among hedge funds tracked by Insider Monkey, with 166 of 895 hedge funds tracked by us reporting a stake in it.
On September 22, London-based Finastra, one of the largest fintech companies in the world, announced that it had entered into a Banking as a Service (BaaS) collaboration with Visa Inc. (NYSE:V) to co-develop new functionality on its Payments Hub solutions and implement Visa Direct.
3. Canadian National Railway Company (NYSE:CNI)
TCI Fund Management’s Stake Value: $4,127,697,000
Percentage of TCI Fund Management’s 13F Portfolio: 13.06%
Number of Hedge Fund Holders: 41
Canadian National Railway Company (NYSE:CNI) remained TCI Fund Management’s third favorite stock pick at the end of the second quarter. Although TCI Fund Management didn’t make any changes to its stake in the railroad company during the second quarter, several funds tracked by Insider Monkey increased their holdings in the company during that period. This list included names like John Armitage’s Egerton Capital Limited, which upped its holdings by 26% to 11.82 million shares and billionaire Israel Englander’s Millennium Management, which boosted its stake more than fivefold to 1.95 million shares.
Although Canadian National Railway Company (NYSE:CNI) has had a long history of consistently paying dividends, it had suspended its quarterly dividend amidst the COVID crisis in 202. Nonetheless, the company immediately resumed paying a dividend to its investors. The stock currently pays a dividend of $0.56 per share, which, based on its last closing price, translates into an annual dividend yield of 2%.
2. Microsoft Corporation (NASDAQ:MSFT)
TCI Fund Management’s Stake Value: $5,041,325,000
Percentage of TCI Fund Management’s 13F Portfolio: 15.95%
Number of Hedge Fund Holders: 258
TCI Fund Management solidified its holdings in Microsoft Corporation (NASDAQ:MSFT) by 14% to 19.63 million shares. However, the company still couldn’t climb to the top spot and remained the fund’s second most loved stock at the end of June. Microsoft Corporation (NASDAQ:MSFT) was the most popular stock among the hedge funds tracked by Insider Monkey, with 258 of the 895 disclosing a stake in the company at the end of the June quarter.
Earlier this year, Microsoft Corporation (NASDAQ:MSFT) had made a $69 billion bid for gaming giant Activision Blizzard, Inc. (NASDAQ:ATVI), which is yet to get regulatory approval. Many investors and analysts are now skeptical that the deal will go through. This can also be gauged from Activision Blizzard, Inc. (NASDAQ:ATVI) current stock price which is trading at more than a 20% discount from what Microsoft Corporation (NASDAQ:MSFT) has offered. To boost investors’ and analysts’ confidence, Microsoft Corporation (NASDAQ:MSFT) CEO Satya Nadella recently gave an interview to Bloomberg Television and said, “Of course, any acquisition of this size will go through scrutiny, but we feel very, very confident that we’ll come out.”
1. Alphabet Inc. (NASDAQ:GOOG)
TCI Fund Management’s Stake Value (Class A Shares): $1,673,717,000
Percentage of TCI Fund Management’s 13F Portfolio (Class A Shares): 5.29%
TCI Fund Management’s Stake Value (Class C Shares): $5,415,660,000
Percentage of TCI Fund Management’s 13F Portfolio (Class C Shares): 17.13%
Number of Hedge Fund Holders (Class A Shares): 191
Number of Hedge Fund Holders (Class C Shares): 153
Alphabet Inc. (NASDAQ:GOOG) has remained TCI Fund Management’s top stock pick since the end of the third quarter of 2021. During the second quarter of this year, the fund further solidified its stake in the company by purchasing an additional 35% class A and 5% class C shares from what it held in the previous quarter. Cumulatively, the fund also had the largest holdings in Alphabet Inc. (NASDAQ:GOOG) among all funds tracked by Insider Monkey at the end of Q2.
Of the 20 analysts on Wall Street who cover the stock, 19 currently have a ‘Buy’ or equivalent rating on it with a consensus price target of $158.05, representing a potential upside of 61%.
You can also look at 10 Best Healthcare Stocks to Buy According to Billionaire Larry Robbins and 8 Best Stocks to Buy According to Billionaire Nelson Peltz.
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Disclosure: None. 10 Best Stocks to Buy According to Billionaire Chris Hohn is originally published on Insider Monkey.
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