Todd Combs Next Buffett ?

The Next Warren Buffett

People like to wonder who will be the next Warren Buffett.

It turns out that Mr Buffett has in fact hired a relative unknown Todd Combs to assist with deciding which stocks to buy . Todd Combs has been in charge of Castle Point Capital Management, a hedge fund with only $400m under management. Berkshire Hathaway has over $100 billion under management and Mr Buffett has said that Combs would control of a “significant portion” of that amount, initially taking on an amount he felt comfortable with, and assuming more control over time.

The suggestion is that Combs will become CIO at Berkshire Hathaway once Warren Buffett finally calls it a day, which could yet be a long way off. Buffett himself has said that Combs is the frontrunner, but no final decision has yet been made.

Warren Buffett seems appreciate the fact that Combs is good at managing downside risk. He knows how to preserve capital, and, said Vidak Radonjic of Beryl Consulting Group, was “able to navigate a difficult 2008 when other hedge-fund managers didn’t.” According to Jena McGregor on Washingtonpost.com Combs shares Buffett’s thorough approach, reads 500 pages a week and does his own research. Does he own a computer we wonder ?

Warren Buffett has said his job would be split in three when he retires – Chairman, CEO and CIO. Rumor has it that the leader for the chief executive role, is David Sokol, 53, currently chairman of Berkshire-owned MidAmerican Energy Holdings.

Warren Buffett’s investment philosophy is surprisingly simple – buy shares in a good company at a reasonable price and wait ! By reinvesting dividends you get the benefit of compound interest and over time shares go up, you also avoid trading costs by not trading. You do of course need to be patient so it helps to have a day job while you are waiting. But Buffett was a millionaire by his early thirties, and he started from a relatively low base. If you can’t be bothered figuring out yourself which companies to buy you can be a coat-tail investor and buy the stock s that Warren Buffett buys – see here Warren Buffett Stocks.

If you had invested $1K in Berkshire Hathaway 45 years ago when you were 20 then, it would now be worth $4.3 million. You of course would be 65, but that it an extreme example of getting rich slowly, as mentioned above Buffett was a millionaire in his early 30s.

Combs was introduced to Warren Buffett by Charlie Munger (Mr Munger certainly seeems to do a lot of introducing). He set up Castle Point five years ago and has achieved cumulative returns of 34% since the fund launched, over the same time the S&P 500 fell by 5.1%.

Warren Buffett told the New York Times that Combs has “always been enamoured with Berkshire. 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 $100m with us or $200m with the next guy.”

James Armstrong, President of Henry H Armstrong Associates, said it was unusual for Buffett to make a public announcement like this. “The fact that he’s come public with one of the names means he must be pretty confident in Mr Combs, or why release the name? It’s not been his practice. It’s not a name I’ve heard before, and I’ve been studying Berkshire for 25 years.”

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