Buffett’s Stock Pickers Are Beating The Market
A year ago Ted Weschler, one half of the duo likely to someday take over the massive Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) stock portfolio and the even more titanic investing legacy of Warren Buffett, was in a footrace with the S&P 500. Weschler was leading by a nose with a 20% gain, vs. 18% for the S&P, in the first nine months of 2013, according to estimates compiled by Fortune.
Then, in November, one of Weschler’s largest holdings, satellite television provider DirecTV (NASDAQ:DTV), announced it had signed up an additional 139,000 subscribers. Another Weschler choice, dialysis-center operator DaVita HealthCare Partners Inc (NYSE:DVA), reported better-than-expected earnings. Both stocks shot up. By the end of the year, Weschler’s portfolio had risen another 11%.
In his annual letter to shareholders in April, Buffett revealed that both Weschler and his partner Todd Combs once again “handily” beat the market. “They have made Berkshire billions already that we wouldn’t have otherwise made,” the Oracle of Omaha told CNBC that month. “They both have a fundamental combination of soundness and brilliance.”
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What will happen to Berkshire after Buffett, 84, is perhaps the most closely watched succession story in corporate American history. If investors are nervous, they aren’t showing it. This summer the price of Berkshire’s A shares floated above $200,000. The conglomerate, which owns dozens of companies, ranging from insurer Geico to railway Burlington Northern Santa Fe to ice cream chain Dairy Queen, has a market cap of $331 billion. The question is whether Berkshire will be able to continue its stellar success after Buffett.
How Combs and Weschler do will comprise a large part of the answer. As of the middle of this year, the two managed a total of just over $14 billion (their allocation has been increasing) of Berkshire’s $115 billion stock portfolio. This month marks four years since Buffett hired Combs. Weschler joined the company a little less than a year later. A third, yet-to-be-named person will run Berkshire’s operating businesses, which have become a much larger proportion of the company’s assets in the past decade. (Buffett says the person has been picked.) None of the plans are final, and Buffett says he has no intention to retire anytime soon.
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