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Good morning. On the Warren Buffett scale. Where is Chris H? Um, just under it. Just below. Yes, just slightly not as good. Burks Hatway is 1965 19% and uh Chris H 18 is 2004. But I um I saw that there was a lot of talk about him in the FD, about Chris Han. For I’ll just mention a Corne van Zeil. who wrote on June 25 that someone pointed out to him that Chris Hone is the best investor in Europe and therefore the World Cup the biggest financier of Extinction Rebellion.
Well, that person is standing right in front of you, Thomas. And in addition, Milou Brand mentions his charity involving Hondus, his Toyota Prius, and his plastic watch, to which I would like to add that the most beautiful photo of Chris H was taken next to a Toyota Previa. Not a Toyota Prier. No. I believe you sent it to me.
Of course. But secondly, I thought, you know what? Then I might just be able to get over it. For recently, his fund TCI The Children's Investment Fund held a meeting. Wolf in sheep's clothing with returns of 18% per year to costs since 2004. An investment conference in New York. Nice and exclusive. And well, of course, sometimes you just have to tell your customers what you're actually doing.
For example, why you sold the alphabet last year and are now buying it back. So I thought, hey, if I just share even more inside info that I get from my sources who passed by there, then maybe I'll end up in the FD even more often. Well , tell me. Well, first some context, because almost every active investor these days who isn't named Chris Hone is being slaughtered by passive investors, by momentum investors, and by that 'heard of gambling-crazy Joe around the corner' who are buying leveraged ETFs, day options, and other gimmicks like mad.
Every country, every index, and every investor on Earth notices this. And Dell can just go to bed 200 billion and be worth 275 billion when they wake up, right? And so this man is an active investor who actually manages to pull it off. Yes. And everything is AI, too, right? So the S&P 500, the MSCI World index, the emerging markets index, the semiconductor index, the I have no idea, but I do like this theme index, and even our own Ax—as the VB writes, they are all AI.
Now, you can deal with this in three ways. The first one is you are Softbank and you just YOLO everything into AI and chips. That is one. The second one is you are Terry Smith. You get very angry about your underperformance because everyone is causing those bizarre movements and everything is AI. And you write a note refuting everything you preached earlier, only to then explain to Unilever and Novo Nordisk that you dumped them.
So, your name is Chris Hone and you create the anti-portfolio that refuses to capitulate and only buys good corporate figures. And the best option is of course Chris Hone's, but it must be said that there is a slight difference between Terry Smith and Chris Han. And that is that Smith has clients who were looking for the exit, causing his fund to drop from 23 billion pounds to 12 billion pounds over the past 3 years.
So Smith is having a very hard time, is in rough waters. Chris Han survived it all. those passive gambling mobs and all the other labels you stuck on them without buying AI. Yes. And that can best be illustrated with one of the presentations at that recent TCI investment conference in New York. So that was late June.
Because if you are TCI, with something like 80 billion dollars under management—just slightly less—and a platinum-rated reputation, then you can keep up just laying good laws and only start earning from them in 5 years . And the little law says a great deal . I'm taking one out. S&P global. That is now kind of being thrown into that software bin , in other words, down.
But of course, it is a credit rating agency, data broker, price provider, and index provider. Because, yes, if you get a credit rating from S&P or Moodies, you can usually borrow more cheaply. So that is very important for companies on Earth. Regardless of whether that data is unique or not. If you want to trade oil, you need Plats' figures, or S&P Energy.
We all know the S&P 500; it is useful. And then they have another Bloomberg product, namely information. And the market thinks that that latest Cap IQ, the Bloomberg product, will be swept off the table by AI that knocks software aside. You know the whole story. We have already discussed it 15 times here.
And the market is always right. Well, according to Chris Hone, the market is therefore wrong, um, because the market thinks: "Yeah, the heart of that business is S&P global." Um, and that forms, uh, part of that markets intelligence division, and so Cap IQ is being outcompeted by AI. But they say that none of that makes sense and that AI doesn't have a leg to stand on when it comes to 80% of the rest of S&P Global's revenue, because 80% of that total revenue comes from credit ratings, the indices, and the oil/commodity pricing business I just mentioned.
Yes. And so, because of that software fear—as Chris H says now—you have a historic opportunity to buy one of the strongest companies on Earth, which has been setting standards for everything and everyone since the 1950s, actually, and before that too. And that markets intelligence division of SAP Global, well, apart from the public data, it is completely rimmed with its own data, with physical data from the past that you can't just pull out of the vault, and data that valuable parties sell to the S&P that is worth a fortune.
So that point adds some extra weight to it. I had to laugh, because they just casually invite the top woman from the cap as well. Martina Tong of S&P Global is coming there. So it will simply come. Because if your name is Chris Hoon and you manage 80 billion and are a star band among all star investors, well, then she’ll come over for a talk.
And of course they report that TCI is right. Yes, that is of course easy to guess. And she also says: "Yes, only 5% of our revenue is threatened by AI because Cap IQ indeed uses public data. But yes, then you still have to take a good shot at our product, she adds." But what if the market ignores S&P Global , and the software fear we've already discussed 15 times lingers for the coming months?
Yes. Not being right is the same as being wrong. Yes, it certainly is. That is, that is the market. Uh, but I think the approach is very nice, because look, what we haven't discussed yet is that you can now buy S&P Global at 19 times the forward earnings. Historically, that has never been so cheap. Well, once in the past 10 years, actually.
And by the way, that is also the biggest gap in terms of rating on moodies that your competitor you have ever seen. And if you then, uh, compare the credit rating of Moodies and the multiple on it with that of S&P, or compare the index provision of MSCI and the multiple on it, or the price- to-earnings ratio on it with that of S&P, then you get the rest of S&P for free if you were to buy the other one for that same multiple.
So look, we've talked about Chris Han quite often. He keeper all the companies over the hedge until he is left with 100 to 200, with moats and crocodiles around them. A fence with 20,000 volts and machine guns on the driveway. Everything is always a bad business according to him. That is why he writes his own sector of asset managers, of which Terry Smith is a fine example.
But this is indeed path number three in this new world of AI and flows before pros and concentrated markets. You are either Softbank or Pokémon and you are betting on the most expensive Pokémon card. Or you are Terry Smith and you throw all your toys out the window and then just go buy what the rest of the kids buy.
Or you are Chris Hone and you buy old-school Lego at the most attractive rating you have ever seen. We'll talk again in 5 years and then we'll see if it worked.
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