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Berkshire Prepares for Life After Buffett

Ted Weschler is an ace stock picker, a value-investing enthusiast, and a pretty accomplished, middle-aged marathon runner. (He finished the 2007 New York City Marathon in 3:30:02.) Those qualities and a solid track record delivering returns as founder and managing partner at Charlottesville (Va.)-based Peninsula Capital Advisors convinced billionaire investor Warren E. Buffett, 81, that Weschler should be part of the new generation of leaders who will run Berkshire Hathaway in the post-Oracle era.

Buffett’s recruitment of Weschler, 50, as an investment manager overseeing a portion of Berkshire’s equity holdings follows the arrival of Todd Combs, who joined late last year from Castle Point Capital Management, a Greenwich (Conn.) hedge fund. When Buffett eventually steps down as chief executive officer, Weschler and Combs, and possibly a third money pro, will oversee the company’s entire $100 billion equity and debt portfolio, according to its Sept. 12 statement announcing Weschler’s hiring.

Weschler won big when he bought 2 million shares of Bank of America (BAC) in the first quarter of 2009 as the financial crisis hammered bank stocks. The shares had more than doubled to $16.23 on a quarterly average basis by the time he sold them a year later. Buffett, who accumulated the biggest shareholdings in Coca-Cola (KO) and Wells Fargo (WFC), invested $5 billion last month in Bank of America’s preferred stock.

Weschler is winding down his $2 billion Peninsula fund and will start his new job early next year. “This is a brilliant move for Berkshire,” Michael Bills, founder and chief investment officer at Charlottesville-based Bluestem Asset Management, said in an e-mail. Under Weschler, Peninsula also held positions in Cincinnati Bell (CBB), Cogent Communications (CCOI), and DirecTV (DTV). It was the biggest investor in bankrupt chemicals company W.R. Grace (GRA), with 10.8 million shares. Peninsula disclosed a stake of more than 10 percent of the company in 2001, and the shares have surged more than 20-fold since then. Weschler worked at Columbia (Md.)-based Grace from 1983 to 1989.

Buffett is clearly a fan, and the admiration is mutual. And pricey. Weschler twice won the privilege of sharing a meal with Buffett in charity auctions in 2010 and 2011 at a cost of $5.3 million. Buffett has said he was searching for money managers who are “genetically programmed” to avoid big risks. Both Weschler and Buffett are fanatical about rigorous bottom-up financial analysis, and Weschler has long been a student of Buffett’s annual letters on the state of Berkshire’s holdings and the financial markets.

In 2005, Peninsula helped finance and recruit investors for the merger of US Airways (LCC) and America West, according to Derek Kerr, finance chief at US Airways. “He impressed us as a good long-term-oriented investor,” says Kerr. “You could tell, from the people that came in and asked questions after he had committed, that he knew a lot of people and was well connected in the investment community.”

The bottom line: Fund manager Weschler, summoned to join Berkshire Hathaway, made a big score when shares of Bank of America more than doubled.

Frye is a reporter for Bloomberg News.
Bit is a reporter for Bloomberg News in New York.
Buhayar is a reporter for Bloomberg News in New York.

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