The data and ratings backbone of global capital markets — a regulated oligopoly with 39% operating margins, now supercharged by the IHS Markit merger
Chris Hohn
TCI Fund Management
Est. ~8.6% of total portfolio
“Chris Hohn: 'We invest in businesses with the strongest competitive positions — companies where we have high confidence the business will be just as dominant in 10-20 years as it is today.'”
The Business
- (SPGI) is the world's foremost financial information and analytics company, providing credit ratings, benchmarks, analytics, and data to global capital markets. The company operates through five segments: S&P Global Ratings (one of only three NRSROs), S&P Dow Jones Indices (provider of the S&P 500 and 1M+ other indices with $16T+ benchmarked), S&P Global Market Intelligence (financial data and analytics), S&P Global Commodity Insights (Platts — the global benchmark for commodity pricing), and S&P Global Mobility (automotive data, formerly IHS Markit automotive).
- The company's competitive position was dramatically strengthened by the $44B merger with IHS Markit in 2022, creating the most comprehensive financial data platform in the world. FY2024 revenue was $14.2B (+14%), net income $3.9B (+47%), operating margin 39% (expanding rapidly), and free cash flow $5.6B (+56%).
- The company employs ~40,000 people across 30+ countries. S&P Global's moat is structural: regulatory requirements mandate credit ratings, trillions in assets are benchmarked to S&P indices, and Platts pricing is embedded in global commodity contracts.
Why They Own It
“Chris Hohn: 'We invest in businesses with the strongest competitive positions — companies where we have high confidence the business will be just as dominant in 10-20 years as it is today.'”
- Chris Hohn's $6.2B S&P Global position (11.5% of TCI) complements his Moody's position and reflects his conviction that the financial information infrastructure is one of the most durable monopoly franchises in the world. S&P Global is the parent of S&P Ratings (one of only three NRSROs), S&P Dow Jones Indices (the provider of the S&P 500 and 1M+ other indices), and a massive data/analytics platform that became even more dominant after the $44B IHS Markit merger in 2022.
- The combined entity is the essential data layer of global capital markets: credit ratings, index benchmarks, commodity pricing (Platts), market intelligence, and risk analytics. FY2024 revenue was $14.2B (+14%) with 39% operating margins and $5.6B in free cash flow.
- The merger synergies are driving rapid margin expansion (from 32% to 39% in one year) with significant further room for improvement. Like Moody's, S&P's ratings business is a government-granted oligopoly — issuers must obtain ratings, and investors and regulators reference S&P's indices.
- Hohn owns both Moody's and S&P Global because the oligopoly is durable regardless of which firm gains share within it — owning both is a bet on the permanence of the ratings and index infrastructure itself.
What the investor sees
At $6.2B and 11.5% of TCI's portfolio, SPGI is Hohn's fifth-largest position. The stock trades at roughly 38-40x trailing EPS of $12.35. Hohn's return math: (1) 10-12% organic revenue growth (ratings issuance + index AUM growth + data subscriptions), (2) 200-400bps of margin expansion from IHS Markit synergies (target: 45%+ operating margins), (3) 1-2% buyback yield, and (4) ~0.8% dividend yield. Total return: 12% revenue growth + 3% margin expansion + 1.5% buyback + 0.8% dividend = 17-18% annual return. The IHS Markit merger creates a unique catalyst: management targets $600M+ in cost synergies and $350M+ in revenue synergies, most of which are still being realized. By 2027-2028, operating margins could reach 45-48%, driving significant EPS growth even with moderate top-line growth.
Financial Snapshot
14208
revenue FY2024 millions
3852
net income FY2024 millions
12.35
eps FY2024
39
operating margin pct
5565
free cash flow millions
13.7
revenue growth pct
~40,000
employees
46.7
net income growth pct
The Moat
- Government-granted ratings oligopoly — one of only 3 NRSROs, with regulatory requirements mandating credit ratings for debt issuance
- S&P 500 and Dow Jones index franchise — $16T+ in assets benchmarked to S&P indices, creating an essential standard that cannot be displaced
- Platts commodity pricing — the benchmark reference price for oil, gas, and metals trading globally, deeply embedded in contracts and regulations
- IHS Markit data integration — post-merger entity provides the most comprehensive financial data platform in the world
- Subscription/recurring revenue — 75%+ of revenue is subscription-based with 95%+ retention rates
- Network effects in indices — as more assets track S&P indices, the indices become more liquid and valuable, attracting more assets
- Regulatory embeddedness — Basel requirements, investment mandates, and derivative contracts reference S&P ratings and indices
What Could Go Wrong
Premium valuation (38x+ earnings) creates downside risk if growth decelerates or market sentiment shifts
Regulatory risk — post-2008 scrutiny of rating agencies continues, with potential for fee caps or model changes
IHS Markit integration complexity — $44B merger brings execution risk in combining cultures, systems, and sales forces
Index fee compression — passive investing growth could lead to ETF sponsors negotiating lower licensing fees
Credit cycle dependency — ratings revenue declines when debt issuance slows during recessions
AI disruption potential — automated credit analysis could reduce demand for traditional ratings over the long term
Competition from Moody's and Fitch in ratings, MSCI in indices, Bloomberg in data
Catalysts
- IHS Markit synergy realization — $600M+ cost synergies and $350M+ revenue synergies still being captured, driving margin expansion to 45%+
- Credit issuance recovery — normalized interest rate environment drives corporate refinancing and new issuance
- Index revenue growth — passive investing trend drives ETF AUM growth, increasing index licensing fees
- AI/analytics product launches — integration of AI capabilities into data products creates new revenue opportunities
- Share buyback acceleration — $5.6B FCF supports substantial capital return
- Sustainability/ESG data — growing demand for ESG ratings and sustainability analytics
- Emerging market expansion — growing capital markets require ratings, index coverage, and data services
In Their Own Words
“Chris Hohn: 'S&P Global and Moody's together represent the essential infrastructure of global debt capital markets. This is as close to a permanent business as exists in public markets.'”
“Chris Hohn: 'TCI focuses on a small number of exceptional businesses. Our portfolio of 9 stocks reflects our belief that concentration in the very best companies produces superior long-term returns.'”
“Chris Hohn: 'We look for businesses with structural growth, high barriers to entry, and pricing power. The financial data oligopoly has all three.'”
“Chris Hohn (TCI Fund): TCI has generated approximately 18-20% CAGR since 2003, achieved through concentrated ownership of monopoly-quality businesses with durable competitive advantages.”