With all his money and influence, Warren Buffett can surely make one famous overnight, as he just did to the 39-year-old hedge fund manager Todd Combs. He picked Mr. Combs to manage a significant portion of Berkshire Hathaway’s stock portfolio. Instantly, there are people call Combs to be Buffett’s “heir” or “successor”.
Not so fast. First of all, Buffett has already three heirs: Howard, Susie, and Peter. As on the successor part, Ravi Nagarajan wrote a good piece on the subject.
Still, managing a significant portion of Berkshire’s portfolio is a big job. I am sure there are many people questioning Buffett’s decision even though it is not up to any outsider to question. Buffett came to Combs’s defense saying Combs fits the culture of Berkshire Hathaway perfectly.
It will take a while for rest of us to accept a 39-year-old to replace an 80-year-old. I wonder how much money Buffett was managing when he was 39 years old and his performance against an adversary environment.
Reuters had an article on Todd Combs following his appointment. The article cited his overall performance, those for each year and monthly statistics:
Apparently, that is good enough for Buffett.
- Through June this year, his fund has risen 28 percent from its November 2005 inception, against a 49 percent drop in his benchmark, the SPDR Financial Services sector fund (XLF.P).
- The fund's best years came in 2007, when it rose 19 percent, and 2006, when it was up 14 percent.
In 2008 when the bottom dropped out during the financial crisis, Castle Point had a 5.7 percent loss. Last year the fund rebounded, climbing 6.2 percent.
- Castle Point notes its returns have not been tied to the underlying performance of financial stocks. Combs realized average returns of 1.7 percent during 36 positive-return months, against gains of 4.8 percent in the XLF.
At the same time, his losses were more muted: down 1.8 percent on average during 20 negative-return months, compared with a drop of 7.7 percent for the index. Castle Point returns were about half as volatile as those of the broader Standard & Poor's 500 Index.
The Reuter authors, Joseph A. Giannone also has a copy of and quoted Todd Combs’s July letter to shareholders in which Combs talked about his investment philosophy:
- "At Castle Point we like to think of ourselves as owners of businesses,"
- "(W)e may begin with the acknowledgment of the pervasive reality of failure -- that, for instance, 99.9 percent of biological species that have ever existed are now extinct," he wrote. "Or, a little close to home, that only one original member of the Dow Jones industrial index continues to be a member today."
This quarter might be the last quarter Todd Combs had to file for his holdings in his current hedge fund Castle Point as in late October, the fund announced it is folding tent because of the departure of key personnel. On the other hand, there could be another filing as the fund existed in 4Q10. We simply do not know. For the time being, we can take a close look at Todd Combs’s portfolio as he stands independent.
Oh, Joseph, I could really use that letter you mentioned in your article.
Short of the letter(s), here are his top holdings as of September 30, 2010:
No. 1: U.S. Bancorp (NYSE:USB), Weightings: 9.63% - 1,000,000 Shares
U.S. Bancorp is a financial services holding company. U.s. Bancorp has a market cap of $47.2 billion; its shares were traded at around $24.62 with a P/E ratio of 16 and P/S ratio of 2.4. The dividend yield of U.s. Bancorp stocks is 0.8%. U.s. Bancorp had an annual average earning growth of 2.1% over the past 10 years.
No. 2: MasterCard Inc. (NYSE:MA), Weightings: 7.48% - 75,000 Shares
MASTERCARD INCORPORATED advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. Mastercard Inc. has a market cap of $31.82 billion; its shares were traded at around $243.17 with a P/E ratio of 18.3 and P/S ratio of 6.3. The dividend yield of Mastercard Inc. stocks is 0.2%.
No. 3: RenaissanceRe Holdings Ltd. (NYSE:RNR), Weightings: 6.68% - 250,000 Shares
RENAISSANCERE Holdings Ltd. provides reinsurance and insurance coverage where the risk of natural catastrophe represents a significant component of the overall exposure. Renaissancere Holdings Ltd. has a market cap of $3.35 billion; its shares were traded at around $60.97 with a P/E ratio of 7 and P/S ratio of 2.1. The dividend yield of Renaissancere Holdings Ltd. stocks is 1.6%.
No. 4: The Chubb Corp. (NYSE:CB), Weightings: 6.35% - 250,000 Shares
Chubb Corporation is a holding company with subsidiaries principally engaged in the property and casualty insurance business. The Chubb Corp. has a market cap of $18.2 billion; its shares were traded at around $57.85 with a P/E ratio of 9.9 and P/S ratio of 1.4. The dividend yield of The Chubb Corp. stocks is 2.6%. The Chubb Corp. had an annual average earning growth of 1.5% over the past 5 years.
No. 5: The Western Union Company (NYSE:WU), Weightings: 6.3% - 800,000 Shares
The Western Union Company is a provider of global money-transfer services. The Western Union Company has a market cap of $11.95 billion; its shares were traded at around $18.11 with a P/E ratio of 13.4 and P/S ratio of 2.3. The dividend yield of The Western Union Company stocks is 1.3%. The Western Union Company had an annual average earning growth of 3.2% over the past 5 years.
No. 6: Starwood Property Trust Inc. (NYSE:STWD), Weightings: 6.19% - 700,000 Shares
Starwood Property Trust, Inc. is a newly formed company that is focused primarily on originating, investing in, financing and managing commercial mortgage loans and other commercial real estate-related debt investments. Starwood Property Trust Inc. has a market cap of $1.02 billion; its shares were traded at around $21.53 with a P/E ratio of 76.9. The dividend yield of Starwood Property Trust Inc. stocks is 6.1%.
Check out his other holdings by clicking on Todd Combs.
On a light note, WSJ has an article on how Bloomberg photographer J. Gregory Raymond obtained a photo of Todd Combs. As it turns out, it is not just we were curious what the “heir to Warren Buffett” as some called him look like, the entire financial related media were wondering at the same time.
With all the resources that Bloomberg has, the curious people like us at large prevailed. Fortunately, Mr. Combs lives in Stamford, Connecticut and he left a high school photo behind him. It could be much harder an assignment.