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Buffett's stock pickers are beating the market


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http://fortune.com/2014/10/14/buffett-proteges-ted-weschler-todd-combs/?xid=nl_termsheet

 

I had two thoughts when I read this:

 

1) This isn't surprising, Buffett is going to pick incredible managers.  It's expected they'll beat the market.

2) They're also running a small portion of the portfolio.  What happens as these guys get bigger, will they see the same fall in returns that Buffett has as well? 

 

 

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http://fortune.com/2014/10/14/buffett-proteges-ted-weschler-todd-combs/?xid=nl_termsheet

 

I had two thoughts when I read this:

 

1) This isn't surprising, Buffett is going to pick incredible managers.  It's expected they'll beat the market.

2) They're also running a small portion of the portfolio.  What happens as these guys get bigger, will they see the same fall in returns that Buffett has as well?

 

2. My favorite thing about them so far is that they have done some non-"stock picking". Weschler was involved with their ResCap acquistion. Combs was instrumental in the Phillips 66 transaction. Knowing that Weschler is a huge Malone fan, I wondered if he will pull out any financial engineering tricks later. 

 

It gives me a little bit of confidence that they can do corporate finance in addition to "stock picking".

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We should NOT be looking at their performance on a YoY basis but using a 5 year yardstick similar to Buffett.  As Graham eloquently said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

 

Tks,

S

 

I'm not sure if Ted Weschler is having a good year being that he a a pretty considerable position in GM which has been terrible this year

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We should NOT be looking at their performance on a YoY basis but using a 5 year yardstick similar to Buffett.  As Graham eloquently said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

 

Tks,

S

 

I'm not sure if Ted Weschler is having a good year being that he a a pretty considerable position in GM which has been terrible this year

 

Isn't it something like a 7 year yardstick now?  I thought he changed it when 5 years didn't work so well.  Maybe I'm wrong.

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hahahha... Touche! Regardless, they are both relatively new and we still need to give them a bit more time before we can judge their returns.

 

Tks,

S

 

We should NOT be looking at their performance on a YoY basis but using a 5 year yardstick similar to Buffett.  As Graham eloquently said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

 

Tks,

S

 

I'm not sure if Ted Weschler is having a good year being that he a a pretty considerable position in GM which has been terrible this year

 

Isn't it something like a 7 year yardstick now?  I thought he changed it when 5 years didn't work so well.  Maybe I'm wrong.

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I truly believe that Buffet's stock pick performance in BRK has been underwhelming in the last few years due to the fact that he's focused on sourcing great companies at reasonable prices in the private market.  Despite BRK being a decentralized holding company, it is still a monstrosity in terms of number of companies, employees, business lines etc.  Hence, Buffet in recent years have resorted to "okay" long term compounders.  Ted and Todd are working with a lesser amount of capital.  More importantly, that's their sole focus.  They are not sourcing deals, reading reports of the various holdco companies, going on CNBC, traveling the world to promote the BRK brand to attract sellers, etc.  This allows Ted and Todd to focus purely on stock picking which allows them to "rinse and repeat" certain investments that are cheap relative to intrinsic value but not long term compounders, i.e. GM.  Ironically, these rinse and repeat generates higher IRRs during their holding periods which somewhat contradicts Buffet's preaching of holding shares for the long run.  This is not to say that the casual investor should start to "rinse and repeat" as well.  Clearly, the Teds and Todds of the world do this on a full time basis and they are world class investors.  Structurally, Ted and Todd have as close to permanent capital as any money manager in history.  I have a feeling that they will continue to outperform for quite some time. 

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We should NOT be looking at their performance on a YoY basis but using a 5 year yardstick similar to Buffett.  As Graham eloquently said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

 

Tks,

S

 

I'm not sure if Ted Weschler is having a good year being that he a a pretty considerable position in GM which has been terrible this year

 

Isn't it something like a 7 year yardstick now?  I thought he changed it when 5 years didn't work so well.  Maybe I'm wrong.

 

Still 5 years. I know because I was at the meeting when he said it hasn't changed.

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Abundant, permanent dry powder on call is definitely a bonus.

 

Didn't realize Suncor was attributed to Ted.  Would have assumed it was Todd due to NOV, etc.  Does anyone know more about this investment for BRK?  Canadian oil sands was certainly contrarian this time last year with Keystone hype and huge differentials on fears of "trapped" oil.

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We should NOT be looking at their performance on a YoY basis but using a 5 year yardstick similar to Buffett.  As Graham eloquently said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

 

Tks,

S

 

I'm not sure if Ted Weschler is having a good year being that he a a pretty considerable position in GM which has been terrible this year

 

Isn't it something like a 7 year yardstick now?  I thought he changed it when 5 years didn't work so well.  Maybe I'm wrong.

 

Just curious - why the anti-Buffett under tone in many of your posts?  Is that you, Alice?

 

-CM

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We should NOT be looking at their performance on a YoY basis but using a 5 year yardstick similar to Buffett.  As Graham eloquently said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

 

Tks,

S

 

I'm not sure if Ted Weschler is having a good year being that he a a pretty considerable position in GM which has been terrible this year

 

Isn't it something like a 7 year yardstick now?  I thought he changed it when 5 years didn't work so well.  Maybe I'm wrong.

 

Just curious - why the anti-Buffett under tone in many of your posts?  Is that you, Alice?

 

-CM

 

I don't like Cherry Coke. My publisher will not permit me to confirm or deny that I am that person.

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We should NOT be looking at their performance on a YoY basis but using a 5 year yardstick similar to Buffett.  As Graham eloquently said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

 

Tks,

S

 

I'm not sure if Ted Weschler is having a good year being that he a a pretty considerable position in GM which has been terrible this year

 

Isn't it something like a 7 year yardstick now?  I thought he changed it when 5 years didn't work so well.  Maybe I'm wrong.

 

It's now a "market cycle" if I remember correctly.  ;D

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