Berkshire Purchases MasterCard Shares After Buffett Hires Combs
Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) reported a stake in MasterCard Inc. (MA), the second-biggest payments network, after the billionaire chairman hired money manager Todd Combs to handle part of his company’s portfolio.
Buffett’s firm owned 216,000 shares of MasterCard on March 31, Omaha, Nebraska-based Berkshire said in a regulatory filing listing its U.S. stock portfolio. The stake is valued at $60.3 million, based on the closing price on the New York Stock Exchange yesterday, when the filing was released.
Buffett, 80, is reshaping his company’s $63.2 billion equity portfolio after the retirement of Lou Simpson, who had picked stocks at the Geico unit. Combs, 40, joined Berkshire last year and will oversee $1 billion to $3 billion of the company’s holdings, Buffett said in February. MasterCard was the second-biggest investment at Combs’s Castle Point Capital Management LLC as of Sept. 30, before he joined Berkshire.
“He’s going to get into the mix, and if he’s had some success or a lot of knowledge on MasterCard, then he’s bringing that to the table,” said Gerald Martin, a finance professor at American University’s Kogod School of Business in Washington.
James Issokson, a spokesman for Purchase, New York-based MasterCard, declined to comment. Buffett, who is also Berkshire’s chief executive officer, didn’t respond to an e-mail sent to an assistant.
The size of the investment suggests that the MasterCard stake was picked by Combs, said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, who has accompanied students to meet Buffett in Omaha.
“Warren Buffett, when he makes an investment, it would typically be hundreds of millions of dollars and up,” Kass said.
Rising consumer spending and a continuing shift from cash and checks to plastic is spurring growth for MasterCard. Household purchases in the U.S., which account for about 70 percent of the economy, rose at a 2.7 percent pace in the first quarter, the Commerce Department said last month.
MasterCard and larger rival Visa Inc. (V) are fighting proposed U.S. caps on debit-card “swipe” fees amid investor concern the rules may damage the firms’ business model. The regulation, mandated by the Dodd-Frank Act of 2010, is weighing more on San Francisco-based Visa, which processed $1.05 trillion in U.S. debit-card purchase transactions last year, more than triple MasterCard’s $333 billion, company data show.
‘More to Gain’
MasterCard CEO Ajay Banga said his company may take market share, depending on how the Federal Reserve crafts the final rules. The company has “more to gain than to lose,” Banga said in a May 3 conference call with analysts after MasterCard reported a 24 percent increase in first-quarter profit.
Buffett has made some of his largest investments in companies that are among the top two in market share in their businesses and have what he believes are competitive advantages that limit the emergence of rivals.
Buffett told the Financial Crisis Inquiry Commission last year that he held stock in Moody’s Corp. (MCO) because the company’s leading share, along with that of rival Standard & Poor’s, a subsidiary of McGraw-Hill Cos., gave the two firms flexibility in setting prices.
Berkshire is the top investor in Coca-Cola Co. (KO), the world’s largest soft-drink maker, Wells Fargo & Co. (WFC), the biggest U.S. home lender, and American Express Co. (AXP), the largest credit-card issuer by customer spending. AmEx also operates the world’s fourth-biggest payments network after Visa, MasterCard and China UnionPay Co.
Combs’s top holding as of Sept. 30 at Castle Point was U.S. Bancorp. Buffett’s firm was the fourth-largest shareholder in the lender as of March 31.
Berkshire’s filing omits information about some transactions because Buffett was granted temporary permission to keep them confidential. The Securities and Exchange Commission sometimes allows companies to withhold data from the public to limit copycat investing while a firm is building or cutting a position.
“It would definitely suggest accumulation,” Kass said of the omissions. “It certainly implies the purchase of one or more new issues to his portfolio.”
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