In June the Glide Foundations latest auction for lunch
Warren Buffett netted the San Franciscobased charity
$3.4 million. Buffett has also profited handsomely from the
annual event: In 2010 and 2011 the highest bidder was
Ted Weschler, now one of the
billionaires two top investment managers at Berkshire
Hathaway and a likely inheritor of his portfolio.
Like his boss, Weschler, who joined the Omaha,
Nebraskabased holding company in 2012, keeps a low
profile. He took the job on the condition that he could commute
midweek to Berkshire headquarters from his home in
A marathoner who remarkably has skipped just one day of
running in the past 36 years, Weschler takes a patient,
disciplined approach to investing. He honed his skills at
Peninsula Capital Advisors, the hedge fund firm he launched in
2000 above a bookstore in a Charlottesville mall.
Peninsulas $2 billion fund returned 1,236 percent before
he shuttered it in 2011, versus 146 percent for Berkshire
during the same period.
Known to do exhaustive research before deciding to allocate
to a company, Weschler tells Institutional Investor
that Buffett has always been a role model. But when it comes to
his portion of the Berkshire portfolio, he says, he hardly ever
discusses specific ideas with fellow investment manager Todd
Combs or the Oracle of Omaha; in an effort to avoid the
consistently mediocre returns that Buffett believes are
produced by committees, each has full discretion over his own
Weschler, 55, is no stranger to this dynamic; he used a
similar system at Peninsula, but he admits that it isnt
the most conventional strategy. Forced to play his own
devils advocate, he says, hes a bear on a given
stock one morning and a bull the next. Then I figure out
which Ted carries the day, he explains.
One of Ted Weschlers distinctive contributions
to Berkshire Hathaway is, I believe, his sophisticated capacity
to handle restructurings, reorganizations, transactions,
mergers, acquisitions, et cetera, says Thomas Russo,
managing member of $11 billion registered investment adviser
Gardner Russo & Gardner. By contrast, many other investors
in public equities merely traffic in the stocks of
well-organized companies, contends Russo, whose Lancaster,
Pennsylvaniabased firm holds almost $1 billion worth of
As a longtime fan of dialysis provider DaVita Healthcare
Partners (a former Peninsula holding), Weschler undoubtedly
helped to steer Buffett into a $3 billion stake in the
Denver-based company. I have done a lot of health care
investing over the years, the Erie, Pennsylvania, native
says. Its curious as big as Berkshire is and
as big as health care is, it is a very small percentage of
Weschler, who holds an economics degree from the Wharton
School of the University of Pennsylvania, has also been a key
player in Berkshires first foray into European
acquisitions, with an emphasis on Germany. Last year he oversaw
the $452 million takeover of Detlev Louis Motorradvertriebs, a
Hamburg-based retailer of motorcycling apparel and accessories.
Wed love to do more deals like this, says
Weschler, who is now the companys chair.
In addition to the favorable German regulatory framework
cited by Buffett, he points to the nations strong
Mittelstand nearly all of its businesses are
either small or medium-size as fertile ground for new
takeovers. Detlev Louis and many of its peers are well-managed,
family-owned companies that welcome being acquired by a
corporation like Berkshire.
As Weschler sees it, both parties benefit: Berkshire buys an
attractive business for a fair price in return for helping it
to avoid the aggressive layoffs and restructurings that often
come with a private equity or strategic acquisition deal. Given
the choice between getting top dollar from a firm interested
primarily in short-term profits or selling to an entity
committed to run their company for the long term while
maintaining the brands integrity, many entrepreneurs will
opt for the latter without hesitation, he says.
In his investor letter for 2013, Buffett praised Weschler
and Combs for outperforming his stock picks for the year
by a lot; hiring them was one of my best
moves, he said in his 2015 letter. Putting his money
where his mouth is, Buffett has given the pair more freedom:
Each now controls $9 billion of the Berkshire portfolio.
Buffett and Berkshire vice chair Charles Munger will be 86
and 93, respectively, when the firms next shareholder
meeting takes place in May 2017, so investors are rightfully
uneasy about the future of the business. Most observers believe
that when Buffett leaves, Weschler will become co-CIO alongside
Combs. (Ajit Jain, president of Berkshires insurance
group, is favored to take over as CEO.)
The challenge for Ted and anyone else following in the
footsteps of Warren is not besting the past performance of
Warren but the size of the capital base, says Tampa,
Floridabased author and Buffett expert Robert Miles.
With over $70 million per day flowing into Omaha to
allocate, it is difficult to outperform.
For his part, money manager Russo thinks that the No.
1 thing that will keep Berkshire Hathaway going is their
reputation as a place where you can sell your business and keep
your leadership intact.
Weschler is pragmatic but confident about the challenges
ahead, stressing Buffetts role as a teacher who has
imbued Berkshire with a culture that will live well
beyond a man. Speaking personally, he adds,
Ive always lived and breathed capital allocation,
so the fact that the numbers are bigger does not bother me that
much other than the fact that it does make it harder to
beat the market.
Weschler hopes that Buffett isnt leaving anytime soon,
not least so he can keep enjoying weekly lunches with the man
from whom he has learned so much. I get to average down
my cost, he jokes.