Chris Hohn, the founder of TCI Fund Management, operates a concentrated investment strategy with just 10 stocks in the portfolio. Based in London, Hohn’s hedge fund manages $44 billion in assets, as per its Q3 2024 report. Despite the small number of positions, TCI’s focused approach has drawn attention for its high-conviction bets, making its quarterly moves particularly noteworthy. The fund recently made significant adjustments, reducing its exposure to Canadian National Railway (CNI) while increasing its stake in Microsoft (NASDAQ:MSFT) (MSFT). Hohn’s philanthropic focus also sets the firm apart, with a portion of its management fees benefiting the Children’s Investment Fund Foundation.
Why is Canadian National Railway’s Role Diminishing?
TCI reduced its holdings in Canadian National Railway during the third quarter of 2024, selling approximately 4.05 million shares and further decreasing its position after the quarter ended. The decision seems tied to the stock’s price trajectory, which peaked earlier in the year. The stake, however, remains sizable at $4.15 billion, reflecting Hohn’s historical commitment to the transportation sector. Initially acquired in 2018, Canadian National shares had been a key part of TCI’s portfolio, with significant purchases during market downturns like the March 2020 correction.
What Makes Microsoft the New Focus?
Proceeds from the sale of Canadian National shares were directed into Microsoft, which now accounts for 11.89% of TCI’s portfolio. The hedge fund added 1.46 million Microsoft shares in Q3 2024, marking a 13% increase in its holdings for the year. Hohn’s initial investment in Microsoft dates back to Q4 2017, with the stock delivering an annualized return of over 26% since then. The fund’s confidence in Microsoft, considered one of the “Magnificent Seven” tech giants, reflects its strategic focus on high-potential technology investments.
Earlier TCI filings highlight the fund’s longstanding themes, including investments in financial services, industrials, transportation, and technology. Consistent with this strategy, its largest holdings remain GE Aerospace (20.64%), Moodys (14.28%), and S&P Global (12.21%), showcasing its preference for established industry leaders. These positions underline TCI’s cautious yet targeted approach in portfolio management.
In past years, Hohn’s investment strategy has exhibited a consistent focus on a few concentrated bets. For example, TCI’s significant stakes in financial services companies like Moodys and S&P Global highlight its emphasis on data-driven sectors. A similar philosophy seems to guide its commitment to Microsoft, particularly with its growing influence in artificial intelligence and cloud computing. This pattern of reinvestment in high-performing sectors aligns with the fund’s long-term growth objectives.
The hedge fund’s decision to trim its railway holdings coincides with its reallocation to tech, reflecting broader trends in global investment strategies. Microsoft’s robust performance, coupled with its strategic positioning in AI, appears to have solidified its place as a core holding for TCI. By balancing industrial and transportation assets with cutting-edge technology investments, the fund maintains a diverse yet focused portfolio that caters to evolving market dynamics.
For readers interested in investment strategies, TCI’s approach demonstrates the potential of concentrated portfolios that emphasize quality over quantity. While diversification is often recommended, high-conviction bets on industry leaders can yield substantial returns if grounded in thorough research and timing. Monitoring such hedge fund strategies offers insights into emerging trends and sectors with strong growth potential.
