Two days ago, Todd Combs was a little-known fund manager running a little-known investment fund in Greenwich, Connecticut.
Today, he is one of the most talked-about names on global markets, after Warren Buffett’s investment giant Berkshire Hathaway appointed Combs to run a significant part of its investment portfolio, and hinted Combs could be Buffett’s successor.
Combs, aged 39, has spent the last five years at Castle Point Capital Management, but only popped up on Berkshire’s radar in the last few months, during the company’s three-year hunt for a Buffett successor.
Buffett told The New York Times overnight that Combs was a talented manager who understood the Berkshire culture.
“He’s always been enamoured with Berkshire,” Buffett said.
“I know he’ll be good, but he’s the right type of guy. We don’t want someone who’s trying to figure out if they can make $100 million with us, or $200 million with the next guy.”
When Buffett admitted jokingly that his plan to run Berkshire Hathaway from beyond the grave could not succeed – the veteran investor said he was “abandoning my hope to give new meaning to the term ‘thinking outside the box’” – he said he plans to split his current role of chief executive, chief investment officer and chairman among a number of people.
Combs now looms as the person most likely to take over the role as chief investment officer – at this stage at least.
“He’s got the best chance of being the successor, but if we find the right guy or gal, we’d take that person, too,” Buffett said.
The global army of Buffett watchers is now trying to build up a picture of Combs, who grew up in Florida and graduated from Florida State University in 1993 with a major in finance.
One of his first jobs was with the Florida comptroller’s office; he moved to a car insurance company called Progressive (where he reportedly helped set insurance rates) before joining Castle Point Capital in 2005.
Like Buffett, Combs is a value investor, scouring the market for investments companies with good fundamentals (strong demand, high barrier to entry, solid future prospects) that have been ignored by other investors.
According to Bloomberg, Combs oversaw $US405 million at Castle Point, with a focus on financial stocks. At the end of September, his largest holdings included Bancorp, MasterCard Inc, Western Union Co and Chubb Corp.
The fund’s performance has been strong in the last few years. Combs generated returns of 13.6% in 2006 and 19% in 2007, fell 5.7% in 2008 and gained 6.2% in 2009.
Like other gun hedge fund investors such as John Paulson, Combs reportedly did very well at the height of the GFC by shorting bank and financial stocks.
While it’s not known exactly how much of Berkshire Hathaway’s portfolio Combs will be responsible for, some commentators have pointed out there is a big difference between running a $400-million portfolio and a $US80-billion portfolio.
“I was surprised to learn that the fund doesn’t own billion-dollar positions because that is what he will have to do,” Jeff Matthews, hedge fund manager and author of Pilgrimage to Warren Buffett’s Omaha told Bloomberg.
Buffett has made it clear that he will not be stepping down from the chief investment officer post any time soon. However, he did reveal that the Berkshire board plans to spend at least half of its next board meeting discussing succession issues.
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