Berkshire says Combs joining as investment manager

[omagh]

Berkshire says Combs joining as investment manager

http://www.marketwatch.com/story/berkshire-says-combs-joining-as-investment-manager-2010-10-25?siteid=yhoof2

 

Warren Buffett's Berkshire Hathaway (BRKa.N) on Monday said Todd Combs would join the firm as an investment manager, potentially bringing the company a step closer to solving Buffett's succession puzzle.

 

Buffett said in a statement that he and partner Charlie Munger looked for three years for someone like Combs "to handle a significant portion of Berkshire's investment portfolio."

 

Combs, 39, has been managing Castle Point Capital for the last five years. It is a long/short equity hedge fund that focuses exclusively on financial services.

[Parsad]

I suspect they will start him off with GEICO's money.  Lou Simpson is retiring and his protege, Bobby Biergin, is starting his own hedge fund soon.  So either Buffett runs GEICO's money or they bring someone in.  I think he's the guy...test him out and see how he does with it.  Cheers!

[Artofgolf]

Here's a link from Bloomberg about Combs.

 

http://www.bloomberg.com/news/2010-10-25/buffett-s-berkshire-hathaway-says-todd-combs-to-join-as-investment-manager.html

 

Art

[maxprogram]

And an article from Carol Loomis with a few more details:

 

http://money.cnn.com/2010/10/25/news/todd_combs_berkshire.fortune/index.htm

 

[Guest]

I suspect they will start him off with GEICO's money.  Lou Simpson is retiring and his protege, Bobby Biergin, is starting his own hedge fund soon.  So either Buffett runs GEICO's money or they bring someone in.  I think he's the guy...test him out and see how he does with it.  Cheers!

 

sanjeev,

 

how do you know all this stuff??

 

I try to follow Berkshire and I feel I know more than the average person, but you know a ton! i'm a bit jealous. :)

[mpauls]

Here are his recent holdings.  Sorry for the Formatting.

 

Security Name % Port

US Bancorp Del 8.15

Mastercard Inc 7.28

State Street Corp 6.79

Western Union Co 6.53

CME Group Inc 5.14

RenaissanceRE Holdings Ltd 5.13

PennyMac Mortgage Investment Trust 4.64

Chubb Corp 4.56

Starwood Property Trust Inc 4.48

Annaly Capital Management Inc 4.38

CIT Group Inc 4.32

Progressive Corp 4.1

JPMorgan Chase & Co 4.01

Goldman Sachs Group Inc 3.83

Charles Schwab Corp 3.62

Broadridge Financial Solutions Inc 3.47

Aercap Holdings NV 3.41

MB Financial Inc 3.35

Genworth Financial Inc 2.86

Global Indemnity PLC 1.83

Blackrock Inc 1.83

Leucadia National Corp 1.78

Hartford Financial Services Group Inc 1.61

Pnc Financial Services Group Inc 0.77

First Financial Bancorp 0.76

Chatham Lodging Trust 0.68

Wells Fargo & Co 0.67

[mpauls]

Here are some of his previous holdings:

 

Security Name

Ace Ltd

American Express Co

Aon Corp

Arthur J Gallagher & Co

Assurant Inc

Bank of America Corp

Bank of New York Mellon Corp

Berkshire Hathaway Inc

CVB Financial Corp

Discover Financial Services

FTI Consulting Inc

Fidelity National Information Services Inc

First Citizens Bancshares Inc North Carolina

First Financial Bancorp

Lender Processing Services Inc

Lincoln National Corp

MGIC Investment Corp, Wisconsin

PHH Corp

PNC Financial Services Group

Phoenix Cos Inc

Popular Inc

Principal Financial Group Inc

RLI Corp

Reinsurance Group of America Inc

Signature Bank of New York

TD AmeriTrade Holding Corp

Total System Services Inc

Two Harbors Investment Corp

[Myth465]

Seems like a good move. My guess is they will have a financials and then an industrial / manufacturing guy.

[Parsad]

sanjeev,

 

how do you know all this stuff??

 

Bobby was at Mohnish's AGM in Chicago last month.  I met him and we spoke for a few minutes.  Very nice, mild mannered guy.  He was the only one working with Lou Simpson for the last five years.  He lives in Chicago and will be launching his fund soon.  Cheers!

[ExpectedValue]

http://streetcapitalist.com/2010/10/25/todd-combs-of-castle-point-capital-to-join-berkshire-hathaway/

 

I have an iFrame with his portfolio and its most recent changes at the bottom. Plus a link to a Google Docs sheet if you would rather work off of that. Hope that helps guys.

 

I think it is really interesting that Stone Point backed Combs. They are an offshoot of Marsh and have demonstrated a good record of picking winners. They were an original investor in Dominic Silvester's fund (now publicly traded as Enstar Group) which has been a compounding machine over the last decade.

[Munger_Disciple]

WSJ reported that Li Lu turned down the offer from Berkshire.

 

http://online.wsj.com/article/SB10001424052702303467004575574630162624198.html#articleTabs%3Darticle

[ExpectedValue]

WSJ reported that Li Lu turned down the offer from Berkshire.

 

http://online.wsj.com/article/SB10001424052702303467004575574630162624198.html#articleTabs%3Darticle

 

I wonder what happened there. Seems strange to have had such a change of heart.

[Munger_Disciple]

It does seem strange. It seems like being appointed to this position is the equivalent of winning the Nobel prize for investing. I am guessing that Li Lu did not want to manage such a massive portfolio.

[Rabbitisrich]

WSJ reported that Li Lu turned down the offer from Berkshire.

 

http://online.wsj.com/article/SB10001424052702303467004575574630162624198.html#articleTabs%3Darticle

 

I wonder what happened there. Seems strange to have had such a change of heart.

 

Yeah, I have no idea either, but the whole announcement of Li Lu was handled rather indelicately. Lu's public debut conspicuously lacked Buffett's support, and his track record didn't appear in public records. The BYD purchase dominated what little information could be found, which gave the appearance, perhaps unfairly, of a one-hit wonder.

 

My guess, based on possibly trivial information mind you, is that Buffett did not want a scaled up version of the BYD bettor. He may have required that Lu limit his bets to the type of situations described in his Columbia University lecture.

 

[tnp20]

"The surprise announcement came after two candidates—including Chinese-American hedge fund manager Li Lu, and another individual Mr. Buffett was interested in—took themselves out of the running for the job, Mr. Buffett said."

 

So the Billion dollar question is who was the other individual who took themselves out of the running......MP is the only guy I can think of.

[Munger_Disciple]

So the Billion dollar question is who was the other individual who took themselves out of the running......MP is the only guy I can think of.

 

My guess is Seth Klarman.

[Parsad]

Here is Comb's record at Castle Point.  I think Buffett is looking for those that would preserve capital, rather than provide outsized returns.  Cheers!

 

Castle Point’s fund gained 6.2 percent last year, fell 5.7 percent in 2008, rose 19 percent in 2007 and climbed 13.6 percent in 2006, according to the letter.

 

http://www.bloomberg.com/news/2010-10-26/buffett-names-castle-point-s-combs-to-berkshire-hathaway-investment-post.html

[yudeng2004]

Actually if I were to think from Li's or Klarman's point of view - that of a very capable hedge fund manager - there are as many good reasons to not do this job as there are taking it.

 

The job itself would be essentially similar to managing a very large hedge fund portfolio but there are some cons:

1) You kind of have to follow the culture of Berkshire precisely, which may or may not be comfortable to you.

2) You do well, people expect it.  You do less than well, people really turn on you.

3) You are going to be judged not only based on your performance but also having high character and a clean personal life. And this bothers some people who just treat investing as a job and nothing holy.

4) You are going to make less than you would staying as a hedge fund manager, and you are already rich so you don't really need another job.

 

I think this automatically rules out people who are managing multi-billions as there is no way the pay can be even remotely close to managing a multi-billion fund.  I can understand if some guy is really rich and can take a 30% pay cut, but if you are going to take say a 50-90% pay cut I think that is very hard to swallow.  So this means choosing some guy who is very able but not managing such a huge amount right now, and Berkshire is a step-up for their career.

 

I think when faced with personal decisions like this, it is simply that the pros must outweigh the cons to you personally.  These people who Buffett considered have not been his lifelong partners like Munger.  They are really just there to do a job, granted a very unique one the privilege of which few others can offer.  But none of these people need the money and they have a lot more choices than we do in life.

 

Ever since I earned enough to retire, whenever I consider something to do in life, my priorities are generally:

1) personal freedom > 2) privilege and long-term opportunity > 3) money

 

If you had hundreds of millions or billions of dollars, and already work in an environment that you created for yourself, would you work for ANYBODY AGAIN?  These are the kind of choice these people face.

[Guest]

"The surprise announcement came after two candidates—including Chinese-American hedge fund manager Li Lu, and another individual Mr. Buffett was interested in—took themselves out of the running for the job, Mr. Buffett said."

 

So the Billion dollar question is who was the other individual who took themselves out of the running......MP is the only guy I can think of.

 

Think Seth Klarman might've been interested?

[CFA Omaha]

Berkowitz?  That is my bet

[zarley]

Can we infer then, that Buffett is 1 for 3 in his recent efforts to recruit capable investment managers?  While I would love to think there are 2 or 3 seasoned and capable managers waiting in the wings who will be perfectly happy to join Berkshire in the near future, I have some reservations about this given the Combs appointment and the Lu / "mystery manager" news.

 

As yudeng points out, Buffett is hoping for quite a lot from an established pro to come into Berkshire.  Perhaps finding the proper motivation and ego to fit the situation is harder than Buffett may have thought three years ago.

 

I have to admit, I'm feeling more uncertain about this process now than I have in the past 3 years.

[ExpectedValue]

Can we infer then, that Buffett is 1 for 3 in his recent efforts to recruit capable investment managers?  While I would love to think there are 2 or 3 seasoned and capable managers waiting in the wings who will be perfectly happy to join Berkshire in the near future, I have some reservations about this given the Combs appointment and the Lu / "mystery manager" news.

 

As yudeng points out, Buffett is hoping for quite a lot from an established pro to come into Berkshire.  Perhaps finding the proper motivation and ego to fit the situation is harder than Buffett may have thought three years ago.

 

I have to admit, I'm feeling more uncertain about this process now than I have in the past 3 years.

 

Maybe Buffett/Munger had a change of heart on the previous candidates. By letting them say that they withdrew from the race, they are able to save face.

[Guest Bronco]

Zarley - need not worry.  Worst case scenario I will accept the position and I will take BRK stock into a new category - large cap growth AND monster value.

 

 

[zarley]

Zarley - need not worry.  Worst case scenario I will accept the position and I will take BRK stock into a new category - large cap growth AND monster value.

 

That's reassuring Bronco; thank you for that.  :)

[Guest Bronco]

Zarley.  No problem.  A more realistic scenario perhaps is that I could turn the best run company of all time (BRK) and make it the next AIG.