Founded by Chris Hohn in 2003, The Children's Investment Fund , or TCI, is a London-based hedge fund with over $15 billion in assets. TCI, which has no Web site, has made a name as an elusive hedge fund and is known for aggressive shareholder activism. The value-oriented fund takes its name from the money it donates to children's charities.

TCI’s, top equity position is 25 million shares of Union Pacific (UNP), which trades with a forward P/E of 9.3, PEG ratio of 0.59 and EV/EBITDA of 6.125.

Union Pacific owns 51,000 miles of route track miles in the Midwest and Southwest U.S. In 2007, its freight revenue mix was 20% from industrial products, 20% from energy, 15% from chemicals, 9% from automotive and 17% from agricultural. Union Pacific’s return on investment is up from 6.4% in 2005 to 8.7% in 2007, and operating margins are up from 13.2% in to 20.7%.

TCI’s second-largest position is just under 6 million shares of MasterCard (MA), an equity value of $1.1 billion. MasterCard trades with a forward P/E of 12.05, and EV/EBITDA of 7.689.

There are over 867 million MasterCard debit cards worldwide, representing 46% of the global debit cards. Net revenue growth year over year is about 24%, with operating income growth of 55.2%. As of its latest quarter, MasterCard generated $388 million in cash flow from operations during the third quarter of 2008 and $931 million during the nine months ended Sept. 30.

TCI’s, third-largest position is in shares of CSX (CSX). TCI has publicly stated that it sees an additional $2.2 billion in EBITDA revenue for CSX within five years. The fund owns just under 18 million shares of the company.

For more ideas, check out what else TCI owns, including CME Group (CME), TransAlta (TAC) and Sterlite Industries (SLT), in the Children's Investment Fund portfolio at Stockpickr.com.

Posted on Nov. 25, 2008