Investing

Billionaire Investor Trims Railway Holdings and Puts It All on This Magnificent 7 Stock

Will Ashworth

Published: January 19, 2025 2:32 pm

Most billionaire hedge fund investors covered by the North American financial media tend to be based in the U.S. However, many people living and working outside America are doing just fine. 

One of those people is Chris Hohn, founder of TCI Fund Management, a London-based hedge fund with $44 billion in assets under management, according to its Q3 2024 13F holdings report, invested in just 10 stocks. Talk about going with your best bets. 

That’s another reason you don’t read much about the man or fund. With so few positions, there’s little new to report each quarter. 

However, given the background of the fund—Hohn created it with his ex-wife in 2003, allocating 0.50% of the management fee to their charity, Children’s Investment Fund Foundation—and the good done by this initial structure, it set him apart from most billionaire hedge fund investors.

In Q3 2024, Hohn cut his position in Canadian National Railway (NYSE:CNI) and significantly increased the fund’s position in Microsoft (NASDAQ:MSFT). 

Here’s why. 

Key Points About This Article:

• Chris Hohn’s TCI Fund Management only owns 10 stocks, but the conviction for each is considerable. 
• In recent quarters, the billionaire investor has been trimming his Canadian National Railway (NYSE:CNI) position as its share price has fallen. 
• The hedge fund moved all the proceeds into one of the Magnificent Seven. 
• Startups in fast-growing sectors — like AI — are solid bets if you’re looking to beat the market by significant margins. If you’re looking for a safer way to do so, consider this report: Discover “The Next NVIDIA”

Just 10 Holdings in the Fund

As I wrote in the introduction, TCI made two changes during the third quarter and did nothing with the other eight. Notably, the top three holdings remained unchanged, accounting for 43.68% of the portfolio at the end of the second quarter and 47.13% at the end of the third.   

The top holding was GE Aerospace (NYSE:GE), at 20.64%, 192 basis points higher than after Q2 2024, despite the fund not adding GE shares to its holdings.

It’s easy to see why Hohn has put one-fifth of the fund in GE. It’s the remaining part of the old General Electric run by CEO and savior, Larry Culp. Since being named CEO of General Electric on Oct. 1, 2018, its stock is up 190%. Of course, that doesn’t consider dividends or shares received for the spinoffs he’s executed as part of the legacy company’s turnaround. 

Boeing (NYSE:BA) really missed out on an iconic leader.

The fund’s second and third-largest holdings are Moodys (NYSE:MCO) at 14.28% and S&P Global (NYSE:SPGI) at 12.21%. It’s not lost on me that both are financial services stocks. 

Hohn’s portfolio has four themes: financial services, industrials, transportation, and technology. TCI’s portfolio is transparent, so you don’t have to read between the lines. 

TCI Owns Big Stakes in Canadian Railway Operators

Canadian Pacific Kansas City (NYSE:CP), based in Calgary, was the fund’s fifth-largest holding as of Q3 2024, at 10.67%, while Canadian National, based in Montreal, was the seventh-largest, at 9.43%. 

In the third quarter, TCI sold 4.05 million shares of CNI stock, reducing its weight by 197 basis points. However, the holding still has a market value of $4.15 billion, bigger than many hedge funds’ total portfolios.  

Hohn first bought 1.77 million shares of Canadian National in Q3 2018. As of Sept. 30, 2018, the share price was just under $90. He bought a lot during the March 2020 correction. 

Sure enough, TCI held 20.91 million shares as of March 31, 2020. The fund had about half that at the end of 2019. I bet he bought about one-third of TCI’s total holdings below $75. 

With the shares peaking at $134.02 in March 2024, it makes sense why the fund is reducing its position. After the end of Q3 2024, TCI filed an amended 13D, selling off an additional 2.72 million shares between Sept. 8 ($117) and Nov. 1 ($108). 

It’s hard to imagine CNI stock falling below $70, as it did in March 2020. Near its 52-week low of $98.96, TCI could be done with the selling for now.

Hohn Poured the Proceeds Into Microsoft

As of its November 13D filing, Microsoft was the fund’s fourth-largest holding, accounting for 11.89% of the portfolio and owning just less than 12 million shares. At current prices, the shares are valued at $4.99 billion, down from $5.16 billion at the end of September. 

In Q1 2024, TCI sold 106,275 MSFT shares. It made no changes in the second quarter and added 1.46 million in the third quarter. Year-to-date, it has added 1.35 million shares, a 13% increase from the end of 2023. 

Hohn first bought 8.07 million Microsoft shares in Q4 2017. Based on the average of the high ($87.50) and low ($73.71) during the quarter, TCI likely paid an estimated $80.61 a share for the initial position. That’s a compound annual growth rate of 26.3% over seven years. 

The hedge fund has increased its Microsoft holdings by 50% over seven years, with nearly 40% of the addition occurring in the third quarter of 2024. 

TCI sees Microsoft as the Magnificent Seven stock to own for the long haul. While it also owns both Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) share classes, its 8.82% weighting is still 307 basis points less than Microsoft.