Buffett's New Hire to Manage 'Significant' Chunk of Berkshire's Portfolio

Warren Buffett
Warren Buffett

Warren Buffett is betting on youth to help lead his revered conglomerate Berkshire Hathaway (BRK.A) after he leaves the scene. The Oracle of Omaha has tapped 39-year-old Todd Anthony Combs to manage a major part of Berkshire's investment portfolio.

Combs, who is CEO and portfolio manager at Greenwich, Conn.-based Castle Point Capital Management, will "handle a significant portion of Berkshire's investment portfolio," Buffett, 80, said Monday, in announcing Combs's hiring.

The three-year search for a successor to Buffett, arguably America's most famous investor, has captivated the financial world. Thanks to a unique combination of homespun wisdom, integrity and consistently outsized investment returns, Buffett has built a fiercely devoted following of fans, thousands of whom gather each year in Omaha, Neb., for Berkshire's annual meeting, also known as the Woodstock of Capitalism.

Combs is an "all-American type" who is "not the least bit interested in publicity, an attitude unlikely to shield him from it," reportedFortune's Carol Loomis, a longtime Buffett confidant. "Now a resident of Darien, Conn., Combs is by birth a Floridian who graduated in 1993 from Florida State University with majors in finance and multinational business operations," Loomis reported.

A Long-Term View

In this year's installment of his widely read annual letter, Buffett reiterated the core investment philosophy that has made him an investing legend along with longtime partner Charlie Munger: Invest in easy-to-understand companies run by honest and talented managers at a good price. Then, nurture those companies and investments over the long term.

"For three years Charlie Munger and I have been looking for someone of Todd's caliber to handle a significant portion of Berkshire's investment portfolio," Buffett said in a press release. "We are delighted that Todd will be joining us."

In 2009, Berkshire notched its best performance since 2003. Shareholder book value increased 19.8% after falling 9.8% in 2008. Berkshire's 2009 performance slightly trailed the S&P 500, however, but over the entire financial crisis the company outperformed that index, thanks to a comparatively small 2008 loss.

The Oracle's Intuition

The appointment of Combs is classic Buffett: Confound the conventional wisdom, and ignore the so-called experts.

Ajit Jain, the Berkshire superstar who runs the National Indemnity business, had long been seen as the front-runner. David Sokol, the hard-driving chief of huge Berkshire subsidiary MidAmerican Energy and recently installed CEO of NetJets, had also been viewed as a top contender.

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Sokol remains the leading candidate for the Berkshire CEO job, the second third of the managing triumvirate that will ultimately take over Buffett's duties. Buffett's son Howard is in line to complete the trio as chaiman of Berkshire, the Oracle has said.

Berkshire has nearly $100 billion in assets, including over $50 billion in equity positions and about $40 billion in corporate and government debt holdings.

Combs managed $395 million on July 1, according to Reuters. "Through June this year, his fund has risen 28% from its November 2005 inception, against a 49% drop in his benchmark, the SPDR Financial Services sector fund," according to the wire service.

"Owners of Businesses"

Combs is a respected money manager and obvious disciple of Buffett's value-driven, company-focused approach. "At Castle Point we like to think of ourselves as owners of businesses," Combs said in a July shareholder letter cited by Reuters.

Combs's top 10 long holdings in June included CIT Group senior secured credit, CME Group, MasterCard, US Bancorp, Western Union, State Street Corp, Amadeus IT and RenaissanceRe, according to the wire service.

Combs shouldn't expect to take the job while Buffett still has his wits about him.

Combs is "not going to take over the whole thing as long as I'm around," the Oracle toldThe Wall Street Journal. "I have this dual position as CEO and CIO, and I will remain in that."

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