Handicapping the successors to Warren Buffett and Charlie Munger has become a major pastime for Berkshire Hathaway followers, so here is a pro and con analysis for two possible candidates, who because of their similar work as Berkshire investment portfolio managers, will be treated as one.
Candidates: Ted Weschler and Todd Combs
Current positions: Manage more than $14 billion in investment portfolios for Berkshire Hathaway.
Pro: With a total portfolio of over $100 billion in stock of leading companies, including Coca Cola, IBM, Wells Fargo, and American Express, Berkshire Hathaway in part resembles a mutual fund. Management of this portfolio has traditionally been Buffett’s job, although he has delegated over 10% of the portfolio to Weschler and Combs, and has steadily increased the amount they manage each year. Weschler and Combs each manage a portfolio of their own choosing. The case for either or both of them is that asset allocation is the primary role that both Buffett and Munger have chosen for themselves, and portfolio management is just that.
Both Weschler and Combs are former hedge fund managers. Ted Weschler was the founder of a hedge fund, Peninsula Capital, and Todd Combs was the CEO and Director of Castle Point Capital.
Berkshire’s company acquisition strategy, which last year included acquiring global food company Heinz, and this year will gain them the Van Tuyl Auto Group, and a portion of Burger King, puts Berkshire in the same class as a hedge fund, only with a long-term ownership time frame.
Alice Schroeder, Bloomberg View columnist and author of “The Snowball: Warren Buffett and the Business of Life,” noted about Ted Weschler that “Warren keeps describing him as an investment manager, but the reality is his skills are more comparable to those of Warren himself. He has a background in broad capital management, including private equity, mergers and acquisitions, owning businesses and being directly involved in their management.”
As Warren Buffett’s handpicked protégés, Buffett has praised their success, noting that “They have made Berkshire billions already that we wouldn’t have otherwise made,” Buffett said on CNBC. “They both have a fundamental combination of soundness and brilliance.”
Con: Lack of management experience leading a company the size of Berkshire Hathaway. There are other Berkshire managers, including Geico’s Tony Nicely, BNSF Railway’s Matt Rose, and Berkshire Hathaway Energy’s Greg Abel, that have more experience helming large corporations.
Biggest Negative: Buffett has already ruled them out, explaining on CNBC that “They will not be the Chief Executive Officer, but they will be there to help the Chief Executive Officer in that arena. Just like people that run given business are there to help in their areas.”
Analysis: This one is an easy one. When Buffett says you are out of the running, you’re out.
© 2014 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results