Berkshire Hathaway (NYSE:BRKA): He can Do Whatever He Wants

I want this job, and I think I could do it. Warren Buffet passed me over for Todd Combs a 39 yearold wonder boy who will manage 2-3 Billion starting in January 2011. It was initally reported that Combs would manage a much larger sum, but as parts of the BRKA Portfolio is liquidated, it becomes clear that he starts with around 3 billion.

The portfolio which was liquidated was only around 8-10 stocks where the company was a large holder and it will be interesting to see if Combs has a similar style he employed at Castle Point, his Hedge Fund he is wrapping up as we exit 2010.

In the board's business sessions, Buffett says, he clarified what role Combs will be playing when he reports for work in January. The backstory here concerns Berkshire's October 25th press release in which Buffett, announcing Combs' hiring, indicated that Combs would be running "a significant portion" of Berkshire's money.

That wording, plainly imprecise, led some media commenters to believe that Combs was going to be handling megabillions of Berkshire's huge investment portfolio, which at the end of September was $113 billion in size.
But Buffett told the board that he and Combs had discussed Combs' initially running perhaps $2 billion to $3 billion. Either amount would greatly exceed the $400 million that Combs was running at Castle Point.

Amounts of $2 billion to $3 billion, though, would be roughly comparable to the sums managed by Lou Simpson, who has long been in charge of investing the funds of GEICO, a big Berkshire division. Simpson, 74, whose offices are in Chicago, is retiring at the end of this year.

Combs will be paid, says Buffett, as Simpson has been: by salary and an incentive compensation plan that gives him a proportion of the amount by which his performance beats the S&P 500 over a three-year period. Says Buffett, "You want to get away from the short-term ups and downs of the market when you're paying someone for running money, and a plan like this does the job."

The details of Combs' position at Berkshire make it clear that he's entering into an extended trial, during which both Buffett and vice-chairman Charlie Munger (who met Combs first and sent him to Buffett) will be assessing the skills and thinking that their new manager will be bringing to the work. Buffett's original description, set forth three years ago, of his plan to hire someone to manage money stated that more than one person might be signed up. The possibility that an additional investment manager or two could be hired to join Combs therefore exists.

At Castle Point, Combs' mandate has been financial services investments. But at Berkshire, Buffett told the board, Combs will in no way be restricted as to what he can invest in. "He can range wherever he wants to," said Buffett.
That happens to be what Buffett has done, of course. At various times, he's been heavy in junk bonds, foreign currencies, and derivatives (a part of the Berkshire portfolio right now).

Warren I am available to work for you, please give me a call.