Todd Combs, the apprentice portfolio manager Warren Buffett hired at Berkshire Hathaway in 2010, seems to be following in the “Sage of Omaha’s” footsteps – buying when the markets are fearful – but could this up-and-comer be better than Buffett?
Combs “was assigned to oversee as much as $3 billion and can make trades without consulting Buffett,” writes Bloomberg. “Combs is part of a second generation of Berkshire leaders who will collectively assume the responsibilities that Buffett has held through his four decades as chairman, chief executive officer and head of investments.” And, Combs is certainly acting the part. “I’d give him an excellent grade,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business.
“He is very much demonstrating what you might expect a value investor like Warren Buffett to do.” For example, Buffett invested in Goldman Sachs when the credit crisis in 2008 was at its most dire and advised shareholders in 1998 to “rejoice when markets decline,” and Combs pulled a similar play on August 8 last year, the first trading day after the S&P downgraded the U.S.
Warren Buffett has said that if a position is small (i.e. under $200 million), it was probably picked by Todd Combs or Ted Weshler, who was hired to help Combs’ manage the Berkshire Hathaway portfolio in September.
So, is Buffett better or Combs?
To answer this question, let’s look at Berkshire Hathaway’s portfolio at the end of the third quarter and see which positions performed better – those under $200 million or the larger positions under Buffett’s domain?
There were five positions initiated by Berkshire Hathaway during the third quarter, and before Weshler joined the company, that were less than $200 million and, as such, likely attributable to Combs: C V S Caremark Corp (CVS), Directv (DTV), General Dynamics Corp (GD), Intel Corp (INTC) and Visa Inc (V). Since the end of September to the close of trading yesterday, all of these except DTV was returning in the double digits. CVS returned 24.86%, DTV 2.72%, GD 21.18%, INTC 20.43% and V 16.81%.
In comparison, Berkshire Hathaway’s 5 largest positions – Coca Cola Co (KO), International Business Machs Cor (IBM), Wells Fargo & Co New (WFC), American Express Co (AXP) and Procter & Gamble Co (PG) – returned quite a bit less than that. KO gained 2.77% from the end of September to the close of trading yesterday, while IBM, a new position for Berkshire Hathaway in the third quarter, returned just 4.26%. AXP and PG did better, returning 8.62% and 6.33% respectively. WFC did the best of the group, returning 22.08%, but the returns still fall short of the positions Combs picked.