Six months to showtime for Buffett’s apprentice

October 26, 2010

Only six months to showtime for Todd Combs. The hedge fund manager handpicked by Warren Buffett to manage a portion of Berkshire Hathaway’s investment portfolio arrives as a virtual unknown. But the thousands of shareholders who regularly descend on the company’s annual meeting in Omaha will expect that to change by next April’s gathering. By then, Combs will need to master more than just financial performance.

He at least seems to have that aspect of the job under control. At Castle Point Capital Management, Combs managed barely $400 million in his long-short fund, only a fraction of what he eventually will inherit at Berkshire, which has some $100 billion to invest. Still, Combs in July told investors his fund had gained 28 percent since its November 2005 inception compared to a 49 percent fall in a financial services sector fund used as a benchmark. His best year was in 2007.

Combs also seems to have something of a handle on the folksy riffs demanded of a value-minded thinker potentially in line to replace Buffett as chief investment officer. In his July letter to investors, Combs evokes Darwinian theory in pointing out the extinction of all but one of the original Dow Jones Industrial Average’s early components.

Where Combs remains a truly unproven quantity is in front of a big crowd. And unlike at most companies, this unique skill has come to be expected at Berkshire. Buffett and his octogenarian cohort Charlie Munger hold court each year at the AGM. At this year’s confab, Munger said he “would make Paul Volcker look like a sissy” when it came to financial reform. And Buffett strummed a ukulele while belting out “I’ve Been Working on the Railroad” to commemorate his $26 billion Burlington Northern acquisition.

This Vaudevillean patina has helped elevate the billionaires and their values above the fray of greed that plagues others in the same tax bracket. But it’s not a suit that fits everyone. It’s possible this limelight was a contributing factor to Li Lu taking himself out of the Berkshire running after he was the subject of a front-page Wall Street Journal article. For Combs, showmanship may be where he truly becomes the Sage’s apprentice.

Comments

talk about huge shoes to fill, opportunity and risks abound for Combs…

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