Moody's Corporation (MCO): Among Billionaire Chris Hohn's Stock Picks with Huge Upside Potential
The Children's Investment Fund Management, also known as TCI Fund Management, is a British hedge fund firm headquartered in London and founded in 2003 by Sir Christopher Anthony Hohn. Hohn, a British billionaire and Harvard MBA graduate (Baker Scholar), also serves as the fund's portfolio manager. TCI is distinguished by its value-oriented, fundamental investment philosophy and its focus on long-term, high-conviction positions in globally competitive businesses. The fund employs a private equity-style approach to public market investing, relying on deep fundamental research, constructive engagement with company management, and a willingness to use shareholder activism when necessary to drive performance. Known for its concentrated portfolio structure, the TCI Master Fund maximizes alpha by targeting high-quality companies with sustainable competitive advantages and predictable free cash flow.
TCI's investment strategy includes opportunistic ventures into corporate transformations and special situations. In line with its activist reputation, the firm is prepared to exert influence on company direction and governance when it deems necessary to unlock shareholder value. This assertive approach has helped cement TCI's reputation as one of the most successful and influential hedge funds in the world.
A significant aspect of TCI's operations is its real estate lending business, which was launched in 2014 under the TCI Real Estate Partners Lending Funds. These funds invest alongside The Children's Investment Fund Foundation (CIFF), the philanthropic arm initially supported by the fund's profits. The lending strategy centers on first mortgage and senior secured lending for high-quality assets, with a particular focus on prime locations in major North American and European cities. This real estate arm reflects TCI's broader investment philosophy, seeking security, quality, and long-term value.
As of Q4 2024, TCI managed $42.4 billion in securities across just nine core stock holdings, reflecting its highly concentrated and conviction-driven investment approach. The firm's blend of fundamental analysis, disciplined value investing, and strategic activism continues to position it as a powerful force in global capital markets. Through its unique alignment of investment and philanthropic missions, TCI also exemplifies how hedge funds can blend financial performance with broader societal impact.
For this article, we searched through TCI Fund Management's Q4 2024 13F filings to identify billionaire Chris Hohn's stock picks with the highest upside potential. We compiled the equities with upside potential higher than 8% at the time of writing this article and analyzed why they stood out as sound potential investments. Finally, we ranked the stocks based on the ascending order of their upside potential. To assist readers with more context, we mentioned the hedge fund sentiment around each stock using data from 1,009 hedge funds tracked by Insider Monkey in the fourth quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 363.5% since May 2014, beating its benchmark by 208 percentage points ().
A businesswoman using a digital device to monitor a workflow orchestration process, illustrating the company's versatility in critical operations.Moody's Corporation (NYSE:MCO) is a leading provider of credit ratings, research, and risk analysis through its subsidiaries Moody's Investors Service and Moody's Analytics. Founded in 1909 and headquartered in New York, Moody's plays a critical role in global financial markets by offering credit risk assessments on sovereign, corporate, and structured finance debt, while also supplying advanced analytics and modeling tools to financial institutions.
In the first quarter of 2025, Moody's Corporation (NYSE:MCO) reported adjusted earnings of $3.83 per share, outperforming consensus estimates of $3.56. This marks a 14% increase compared to the same period last year, reflecting both resilient demand for credit assessments and solid operational execution. Revenue reached $1.92 billion, exceeding analyst expectations of $1.88 billion and rising 8% year over year, with both the Ratings and Analytics segments contributing to the growth.
Despite a 9% year-over-year rise in total expenses to $1.08 billion, including $33 million tied to its ongoing Strategic and Operational Efficiency Restructuring Program, Moody's Corporation (NYSE:MCO) maintained robust profitability. Adjusted operating income climbed 10% to $994 million, and the operating margin improved to 51.7%, up from 50.7% in the prior year.
Moody's Corporation (NYSE:MCO) ended the quarter with $2.2 billion in cash, down from $2.97 billion at year-end 2024, as it continued returning capital to shareholders, repurchasing 0.8 million shares at an average price of $481.77. The company maintained a solid liquidity position, supported by $6.8 billion in outstanding debt and an additional $1.25 billion available under its revolving credit facility.
With an estimated upside potential of 9.17%, Moody's Corporation (NYSE:MCO) offers an appealing mix of defensive business characteristics, steady earnings growth, and disciplined capital allocation. Its dominant market position and consistent performance make it an attractive candidate for portfolios seeking quality exposure in financial services with room for continued appreciation.
L1 Capital International Fund made the following comment about Moody's Corporation (NYSE:MCO) in its Q3 2023 :
'Portfolio adjustments during the September 2023 quarter were modest, diversified, but meaningful. In total around 10% of the Fund was divested and reinvested into opportunities we consider provide a superior risk-adjusted base case return.
Overall, MCO ranks 7th on our list of Billionaire Chris Hohn's stock picks with huge upside potential. While we acknowledge the potential of these stock picks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than MCO but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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