U.S. Markets open in 4 hrs 31 mins

TCI Fund Bulks Up on Alphabet in 3rd Quarter

Regular readers of my articles here at GuruFocus will know that I like to keep a close eye on the activities of Sir Christopher Hohn and his hedge fund, The -Children's Investment Fund (TCI), as it is arguably one of the world's best hedge funds.

As I reported at the end of August, according to research conducted by the Financial Times, TCI's flagship Master Fund has produced investment gains of $17 billion since the beginning of 2010. It has provided an estimated annual return for investors of 18% net of fees since inception at the start of 2004.


Today the hedge fund manages $24 billion. Figures published at the beginning of 2019 revealed that the fund added 18% in the first quarter of the year.

Concentrating on quality

According to TCI's third-quarter SEC filing, the three months were a relatively busy trading period for the firm. The 13Fs only give us a snapshot of a hedge fund's equity portfolio at a certain point in time and exclude any debt or cash positions, but they are a great starting point for further research.

According to the TCI fund's third-quarter 13F, the fund added to all of its significant positions. Its most significant position was Alphabet Inc. (NASDAQ:GOOG). The fund owned 3.5 million shares in the company at the end of September, with a total value of $4.3 billion and a portfolio weight of 22.4%. Hohn and his team increased the position by 2% during the quarter.

The fund also increased its stake in Charter Communications (NASDAQ:CHTR), which is its second-largest position. The fund increased its holding by nearly 5% to 10.2 million shares, giving it a porfolio weight of 21.8%.

Together, Alphabet and Charter, make up 44% of TCI's $19.2 billion equity portfolio, or $8.5 billion of assets under management.

The third- and fourth-largest positions in the portfolio were also increased during the third quarter. Canadian Pacific Railway (NYSE:CP), which makes up 12.5% of the equity portfolio, was boosted by 6.4%, while the position in Canadian Natl Railway Co. (NYSE:CNI) was increased by 0.6%, giving it a 8.9% portfolio weight. The value of these two holdings together is around $4.1 billion.

One key sale

Hohn and his team were doing a lot of buying in the third quarter, but they also did some selling. Microsoft (NASDAQ:MSFT), which used to be among the fund's top three holdings, has now slipped to fifth place after Hohn's traders sold 35% of the position.

The 10.7 million shares of Microsoft now account for just 7.7% of TCI's equity portfolio. The hedge fund first invested in the company back in the fourth quarter of 2017. After peaking at 21.8 million shares in the fourth quarter of 2018, the firm has gradually been reducing the holding as the company's stock price continues to rise.

TCI also sold Equifax Inc (NYSE:EFX) in the third quarter of 2019. The hedge fund decreased its position by 50%. The stock now makes up 0.6% of the portfolio. This has been a short-term trade for Hohn and his team; TCI only initiated the position in the first quarter of this year, but with the stock up 45% year to date excluding dividends, it seems the hedge fund was happy to take profits.

As well as tweaking its existing positions, TCI also added some holdings to its portfolio in the third quarter. The hedge fund acquired just under 1.2 million shares in defense group Raytheon Co. (NYSE:RTN), giving it a 1.2% portfolio weight. The firm also initiated a position in Autodesk Inc. (NASDAQ:ADSK) of 113,000 shares, giving it a 0.09% portfolio weight.

Disclosure: The author owns no share mentioned.

Read more here:



Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.

This article first appeared on GuruFocus.