(BRK.A), (BRK.B)
While Warren Buffett gets all the attention for pulling the trigger on Berkshire Hathaway’s biggest deal to date, the $37 billion acquisition of Precision Castparts Corp. It was Todd Combs that first brought the company to Buffett’s attention. Combs took his first position in Precision Castparts three years ago, and at the time of the announcement of Berkshire’s takeover, the stake had grown to 3% of the company.
That the biggest acquisition in Berkshire’s history comes because one of his portfolio managers clearly pleases Buffett. “You have to give Todd Combs credit for the deal,” Buffett said on Monday, noting that he had never heard of the company before Combs brought it to his attention. ”Todd told me a lot about it, and over the last few years I have become familiar with it,” he added.
It wasn’t until Precision Castparts’ CEO and Chairman Mark Donegan visited Berkshire, when he was making the rounds visiting some of the large shareholders, that Buffett got interested in making a bid for the leading aerospace manufacturer.
The Dynamic Duo
Five years ago, Buffett hired stock-pickers Todd Combs and Ted Weschler, entrusting each one with a billion dollar portfolio. He placed no restrictions on what they could buy, and he has purposely stayed away from back seat driving. As Buffett’s confidence has grown in the two portfolio managers, he has increased the size of each of their portfolios, which now sit at around $9 billion.
Todd Combs, a Columbia Business School graduate and the former head of the hedge-fund Castle Point Capital, was hired by Buffett in October of 2010. He made a name for himself when Castle Point had an annual return of 34%.
Ted Weschler, who came on board at Berkshire in September of 2011, is a graduate of the Wharton School, and was a partner in Peninsula Capital Advisors, LLC.
A Path Forward for Berkshire
Clearly, whoever assumes the reins at Berkshire post-Buffett now has excellent managers to handle its $100 billion-plus stock portfolio, which includes such blue chip stocks as Coca-Cola, America Express, and Wells Fargo. And, since the biggest job that Berkshire’s CEO has on his plate is capital allocation, both Combs and Weschler also offer another way for the next CEO to identify worthy companies to add to the conglomerate.
The latest one, Precision Castparts, is a big win for Todd Combs, and a big win for Berkshire.
© 2015 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.