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Saturday, October 30, 2010

TENNESSEAN.COM: Buffett to buy alcohol distributor

By G. Chambers Williams III • THE TENNESSEAN • October 29, 2010

Two companies owned by Warren Buffett's Berkshire Hathaway Inc. will acquire the Nashville-based Horizon Wine & Spirits, the state's largest distributor of alcoholic beverages, the companies said Thursday.

McLane Co. of Temple, Texas, and its subsidiary, Atlanta-based Empire Distributors, will take over Horizon, which also has operations in Chattanooga.

The move expands McLane and Empire's alcoholic-beverage distribution business into Tennessee.

Tommy Bernard, chief executive of Horizon and son of its co-founder, Harold "Jobe" Bernard, will remain in charge of Horizon after the sale.

Horizon began operations in Nashville in 1947 as B&G Wholesalers, Inc., and in 1961 it purchased Lookout Beverage in Chattanooga.

Earlier this year, McLane, a $30 billion food service supply company, acquired Empire and made its first move into distributing alcoholic beverages. It will now have those operations in Georgia, North Carolina and Tennessee.

"McLane and Empire are very excited about our agreement to acquire Horizon and enter the Tennessee market," said David Kahn, Empire's president, in a statement. "Tommy Bernard has built one of the finest and most highly respected companies in our industry."

Bernard did not return calls Thursday seeking further comment about the sale, which McLane said "is subject to customary closing conditions." No date was immediately given for the deal to become final.

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Friday, October 29, 2010

WALL STREET JOURNAL: Buffett: Combs Is 'a 100% Fit'

The new heir apparent to Berkshire Hathaway Inc.'s roughly $100 billion investment portfolio came to the job the old-fashioned way: He applied for it.

Wall Street was still agog Tuesday about Warren Buffett's selection of Todd Combs, a little-known 39-year-old fund manager who is the leading contender to take over Mr. Buffett's portfolio when the investing legend dies or retires.

Mr. Combs was one of hundreds of people who responded to an unconventional "help wanted" request Mr. Buffett made in early 2007. But his initial inquiry didn't distinguish itself. Undaunted, the low-key father of three, who lives in Darien, Conn., recently sent another letter to Berkshire Vice Chairman Charles Munger asking for a meeting. Mr. Munger said in an interview that he gets "hundreds" of such requests each year, but "something in his request piqued my interest."

The two soon met for a lunch that extended well into the afternoon at the California Club in downtown Los Angeles. Mr. Munger later phoned Mr. Buffett and told him, "this is a guy I am sure you are going to like," Mr. Munger recalls.

Mr. Buffett says he and Mr. Munger were sold on Mr. Combs not only because of his ability and intelligence but also because they were convinced he would fit in to Berkshire's no-fuss culture.

Mr. Combs, a Sarasota, Fla., native who is still partial to his alma mater Florida State Seminoles football team, struck a lasting impression, Mr. Buffett says. He and Mr. Munger arrived at the decision based on the same kind of "gut check" they make with acquisitions of companies.

"He is a 100% fit for our culture," Mr. Buffett says. "I can define the culture while I am here, but we want a culture that is so embedded that it doesn't get tested when the founder of it isn't around. Todd is perfect in that respect."

Other Berkshire shareholders had a less enthusiastic response to the news. Following Monday afternoon's announcement that Mr. Combs would join Berkshire as an investment manager, Berkshire's Class A shares on Tuesday fell $1,575, or 1.3%, to $123,455 in 4 p.m. New York Stock Exchange composite trading while the broader market edged higher.

Mr. Combs's rise to one of the most visible, and high-pressure, posts in American business doesn't follow a typical path of privilege and pedigree.

"He is smart, and he can adapt," says Sheryl Lucante, who was the maid of honor at his wedding to wife April. "When he got into this business, he didn't know anybody."

After graduating from Florida State in 1993, he worked as an analyst for a state financial regulator, a job that gave him insights into the inner workings of banks and fraud investigations.

He then joined auto insurer Progressive Corp., working in the department that analyzes risks and sets rates for auto-insurance policies. It was there he met Chuck Davis, a company director, who would later help him get his hedge fund started.

People who have worked with Mr. Combs say he is curious about the workings of the financial world, with a deep understanding of finance, business and regulation. He does his own research and spends significant time reading newspapers and arcane financial documents, such as insurers' statutory filings and prospectuses for securities backed by pools of assets.

In 2000, Mr. Combs enrolled in Columbia Business School, where in his second year he was one of 40 students picked for its Value Investing Program. There, Mr. Combs learned techniques to identify and analyze out-of-favor stocks from professional money managers and renowned finance professors including Bruce Greenwald.

Richard Hanley, manager of Hambletonian Partners LP, a hedge fund in New York, taught a course called "Applied Value Investing" at Columbia Business School as an adjunct professor in 2002. "When you teach, you see some people that just go through the motions," Mr. Hanley says, "and some people who genuinely want to make money. That's where Todd's head was."

Mr. Combs, recalls Mr. Hanley, "stood out in his level of intensity among a very intense group of MBAs all trying to get to the front of the line." Was Mr. Combs far and away the best student Mr. Hanley ever taught, much as Mr. Buffett was the greatest student Benjamin Graham ever had? "I don't remember saying to myself, 'This guy is the next Warren Buffett,' " says Mr. Hanley, "but he probably had the greatest desire to win."

After completing business school in 2002, Mr. Combs quickly found work. Scott Sipprelle, a former Morgan Stanley managing director and hedgefund manager who is now running for Congress, gave Mr. Combs his start in the hedge-fund world when he hired him to analyze financial stocks held by his firm, Copper Arch Capital LLC. He says Mr. Combs, a heavy coffee drinker, worked long hours and created voluminous spreadsheets packed with data used to assess the probability of negative events happening to financial-services firms.

Copper Arch, which had roughly $1 billion in assets at its peak, modeled itself after Mr. Buffett's style of investing, targeting a long-term investment horizon, holding a fairly concentrated portfolio of stocks, and trying to understand its core holdings intimately. "We called Warren Buffett the spiritual mentor of the firm; we talked about him constantly, read and debated his annual letters, and analyzed his portfolio religiously," says Mr. Sipprelle, who has never met the billionaire investor in person.

Mr. Combs left Copper Arch in 2005 when a new opportunity came along. Greenwich, Conn.-based Stone Point Capital had for the last few years been looking to start a fund that would invest in the stocks of publicly traded companies using similar principles as its core operations, which generally only bought stakes in private companies.

Mr. Davis, Stone Point's CEO, says he interviewed dozens of candidates before focusing on Mr. Combs, who he had kept track of following his days at Progressive. After "nine months of intensive back and forth, we decided to back him," say Mr. Davis, whose firm provided $35 million of seed money and operational resources to help Mr. Combs start his fund, Castle Point Capital Management LLC.

Mr. Combs seemed more excited about shares in his portfolio than most managers, says Jared Perry, who helps run investment firm Stonehorse Capital, which signed up as an investor in Mr. Combs's fund.

When Mr. Combs meets clients outside the office, there is little chitchat. He lights up when the subject of the market is broached and launches into a discussion of his biggest investment positions. "It's tough to find someone that passionate and thoughtful," said Mr. Perry.

In 2006 and 2007, as the bubble in credit markets grew, Mr. Combs's skills spotting problem areas started to become apparent. He found construction loans in Florida's slowing real-estate market and traced their origination to banks in the Midwest, and identified financial firms that had large exposures to illiquid assets and were heavily reliant on short-term funding that could dry up suddenly.

Mr. Combs profited by "shorting" the stocks of some financial companies as markets crumbled. By early 2006, Mr. Combs had become downbeat about the prospects for Fannie Mae and Freddie Mac, the mortgage lenders that two years later would run into deep trouble and be rescued by the government.

Mr. Combs's short positions on financial shares helped him manage through the financial crisis and the market's meltdown, though he didn't emerge unscathed. Mr. Combs suffered losses of a little more than 5% in 2008, though that return trounced the overall market's. As markets collapsed in September 2008, and his fund lost 9% during that month, clients say Mr. Combs was disappointed but quite calm, unwilling to sell shares he believed in. Last year, his hedge fund rebounded, rising just over 6%, a figure below the overall market's gain. So far this year, Mr. Combs's fund has lost about 4%, according to an investor. That is worse than the 6% gain of the Standard & Poor's 500-stock index.

Others who became fans of Mr. Combs say that, unlike many hedge-fund mangers, he spent little time sharing investment ideas with others in the business, preferring to develop his own ideas. But some were less impressed after examining Mr. Combs's operation, part of the reason his firm hasn't grown larger than $400 million.

Among his current investors: Insurance company Axis Capital and Walton Investment Partnership, which invests for sons of Wal-Mart founder Sam Walton, and a "prominent New York museum," according to documents provided to an investor.

Clients say Mr. Combs has done a better job watching out for downside risk than he has finding huge gainers. Focusing on banks, brokerage firms and insurance companies, Mr. Combs's returns since launching his firm in November 2005 are a cumulative 34%, according to an investor.

Around the office, Mr. Combs is low-key, wearing khaki pants and a button-down shirt, rarely wearing a tie and jacket, say those who know him. He spends many Sundays in the office, sometimes calling his clients to discuss investment positions. A photograph of his family is prominent on his desk, along with tall piles of research materials and annual reports.

That hard work was present when Mr. Combs was a Columbia student. His former teacher Mr. Hanley told the class he would award a $10 gold piece—then worth about $175, he recalls—for the stock pick with the best performance over the next sixth months. About half the class chose to work in pairs, but Mr. Combs decided to work alone, recalls his former professor. And Mr. Combs also differed from many of the other students in going short.

While Mr. Hanley can't recall the name of the stock Mr. Combs bet against, he remembers that it was "a leveraged, energy-related stock" that went down at least 50% over the coming sixth months, handily beating all the other stocks selected by the class.

"I'd completely lost track of Todd until 4:30 p.m. [Monday] afternoon," says Mr. Hanley. "I still owe him the $10 gold piece, but now I know how to get a hold of him."

—Jason Zweig
contributed to this article.


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Thursday, October 28, 2010

WALL STREET JOURNAL: Sun Life to Sell Unit to Berkshire Hathaway

TORONTO—Sun Life Financial Inc. has agreed to sell its life reinsurance business to Warren Buffett's Berkshire Hathaway Life Co., a move that enables the Canadian life insurer to bolster its highly watched regulatory capital levels.

Berkshire is buying a reinsurance unit that has life insurance in-force of C$113 billion (US$110.38 billion) and 70 people in offices in Canada, the U.S. and Ireland. Terms weren't disclosed. The transaction is expected to close Dec. 31.

Low interest rates are wreaking havoc for Canada's life insurers, prompting them to consider asset sales. Sun Life is also selling noncore assets to redeploy capital into areas where it sees growth, namely in the U.S., where it is making a big push to expand, in Asia and in its wealth-management business.

"Our reinsurance business is profitable but it is not a growth area," said Sun Life Chief Executive Don Stewart in a statement.

The transaction is expected to increase Sun Life's minimum continuing capital and surplus requirements, or MCCSR, by 10 to 14 percentage points, the company said. Its MCCSR ratio was 210% as of June 30.

A ratio of 100% means the company has adequate capital. The Office of the Superintendent of Financial Institutions, responsible for setting policy and monitoring the financial-services industry, requires life insurers to maintain an MCCSR ratio of at least 120% and expects them to target a ratio of at least 150%.

While Sun Life has much lower interest-rate sensitivity than its larger Canadian rival Manulife Financial Corp., analysts expect declining benchmark government bond yields to hurt third-quarter earnings, as the life insurers are forced to revise their actuarial assumptions on policies. Rising equity markets are expected to offset somewhat the impact of lower rates.

Sun Life and Manulife report their third-quarter results next week.

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Tuesday, October 26, 2010

CNBC: Berkshire's Hiring of Hedge Fund Manager Creates Instant Leading Contender for Warren Buffett's Investment Role

Published: Monday, 25 Oct 2010 | 6:36 PM ET
By: Alex Crippen
Executive Producer

Warren Buffett
Getty Images
Warren Buffett

Warren Buffett's Berkshire Hathaway revealed tonight (Monday) that Todd Combs, a 39-year-old hedge fund manager from Connecticut, will "soon be joining Berkshire as an investment manager."

That instantly launches the relatively unknown investor into the spotlight as a leading contender to eventually succeed Buffett as manager, or one of the managers, of Berkshire's vast portfolio.

He's not, however, the only candidate. In July, Charlie Munger told the Wall Street Journal that it was a "foregone conclusion" Chinese investor Li Lu would become one of Berkshire's top decision makers on investments.

In a news release, Buffett is quoted as saying, "For three years Charlie Munger and I have been looking for someone of Todd’s caliber to handle a significant portion of Berkshire’s investment portfolio. We are delighted that Todd will be joining us."

The release says Combs has been managing Castle Point Capital in Greenwich, Connecticut, for the past five years.

Fortune's Carol Loomis, Buffett's friend and editor of his annual letter to shareholders, writes tonight that Buffett met Combs through Munger, who thought Combs would fit in well at Berkshire.

Loomis reports:

Buffett described Combs as an "all-American type" who is not the least bit interested in publicity, an attitude unlikely to shield him from it. Now a resident of Darien, Conn., Combs is by birth a Floridian who graduated in 1993 from Florida State University with majors in finance and multinational business operations.

Buffett also tells Loomis that Combs' investment record during the financial crisis was "pretty good" and Loomis calls his hiring a clear indication Buffett is satisfied with Combs' performance.

According to Loomis, Combs will continue to work out of Connecticut and won't be moving to Omaha.

Combs' Castle Point is described as a long/short hedge fund that takes positions in financial services companies. It began full-scale investing in late 2007, the same year Buffett began his search.

Loomis says it would have "met immediate disaster" during the financial crisis if it had only gone long on financials, but was "apparently saved" by its short positions.

She also notes that Combs "ducked all the most famous disasters," by not going long on AIG, Lehman, Bear Stearns, Citigroup, Washington Mutual, Countrywide, Fannie Mae or Freddie Mac.

That, she writes, is consistent with Buffett's stated intention in his 2007 letter to hire someone who is "genetically programmed to recognize and avoid risk, including those never before encountered."

In its most recent 13-F filing with the SEC, Castle Point lists U.S. Bancorp ($22.8 million), Mastercard ($20.4 million), and State Street ($19.0 million) as its three largest long positions as of June 30. Berkshire also reports holding U.S. Bancorp stock. Its 69 million shares, as of June 30, would have a current market value of $1.6 billion.

Berkshire Portfolio

It is important to note that today's announcement does not signal Combs will automatically become the "next" Warren Buffett and eventually run all of Berkshire Hathaway.

Buffett has said for some time now that when he's no longer running Berkshire, his duties will be split among a new CEO, who would oversee the operating businesses, and one or more investment chiefs.

Loomis notes that the hiring of Combs "at least partially satisfies" Buffett's 2007 plan to "hire a younger man or woman with the potential to manage a very large portfolio, who we hope will succeed me as Berkshire’s chief investment officer when the need for someone to do that arises."

He noted at the time that "as part of the selection process, we may in fact take on several candidates."

Longtime Buffett-watcher Whitney Tilson says in an email tonight that given Berkshire's many "enormously successful" investments in financials, "and the likelihood that there will be more busts/panics in this sector over time (human nature never changes) – it makes sense to have a specialist in this area be one of the investment managers going forward."

Tilson speculates that with Li Lu concentrating on Asia and China, and Combs focused on financials, Berkshire could name another investment manager, perhaps with a background in consumer products and retail.

Current stock prices:

Berkshire Class B: [BRK.B 83.33 --- UNCH (0) ]

Berkshire Class A: [BRK.A 125030.0 --- UNCH (0) ]

U.S. Bancorp: [USB 23.47 -0.12 (-0.51%) ]

Mastercard: [MA 245.15 2.51 (+1.03%) ]

State Street: [STT 40.26 -0.14 (-0.35%) ]


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CNBC: Berkshire Hathaway Successfully Defends Decision Not to Write-Down Stock Losses

Published: Monday, 25 Oct 2010 | 5:28 PM ET

By: Alex Crippen
Executive Producer

The SEC has completed a review of Berkshire Hathaway's annual earnings report for 2009 after Warren Buffett's company answered accounting questions raised by the regulatory agency.

In a letter dated September 8, and posted today by the SEC on its EDGAR website, regulators tell Berkshire their review of the company's Form 10-K for 2009 has been completed and they "have no further comments at this time."

In a letter dated April 7 to Berkshire, the SEC notes that the company had reported $1.86 billion in unrealized losses for stocks that had "been in an unrealized loss position for at least 12 months."

The SEC wrote that while it knows Berkshire doesn't use a "bright-line test" to determine if losses are temporary, the "duration of unrealized losses in your portfolio appears to be a strong indication that these losses are not temporary." Under accounting rules, non-temporary losses would need to be written-down and reported as an actual loss, even if the shares are not sold.

In a May 7 letter to the SEC, Berkshire CFO Marc Hamburg responded that the amount of time a stock has been in the red is "one factor, but not the only factor" when deciding if losses are temporary or not.

He noted that about 77 percent of the $1.8 billion in 12-month-plus unrealized losses were attributable to two stocks: Kraft Foods [KFT 32.47 0.57 (+1.79%) ] and U.S. Bancorp [USB 23.47 -0.12 (-0.51%) ]. Both positions were "principally acquired" in 2006 and 2007.

As of December 31, Berkshire's unrealized loss on Kraft was $789 million, or 18 percent of its cost. Unrealized losses on U.S. Bancorp totaled $646 million, or 27 percent of cost.

Hamburg writes that as of that date, Berkshire had concluded both companies had "financially sound" underlying businesses and "significant future earnings potential" that made it "likely their stock prices would eventually exceed our original cost."

Noting that in the first quarter of 2010, Kraft's stock was up 11.3 percent and U.S. Bancorp had advanced 15.0 percent, Berkshire said it was "reasonably possible" both stocks would "recover to our cost within the next one to two years."

And, in keeping with its well-known buy-and-hold philosophy, Berkshire said it had the "ability and intent" to not sell the stocks until they did recover.

As a result, Berkshire argued that its decision not to write-down the investments was "appropriate" and didn't violate accounting rules. It promised to keep looking at its unrealized losses and didn't rule out a write-down in the future.

That was apparently enough for the SEC.

Berkshire's faith in Kraft (despite Buffett's objections to the food giant's acquisition of Cadbury) has been rewarded with a 19.5 percent stock price gain so far this year.

U.S. Bancorp's stock has further to go for its recovery, giving up most of its gains from earlier in the year to leave it with a 4.3 percent YTD advance.

Current Berkshire stock prices:

Class B: [BRK.B 83.33 --- UNCH (0) ]

Class A: [BRK.A 125030.0 --- UNCH (0) ]


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USA TODAY: 'Oracle of Omaha' Warren Buffett is a Cornhusker at heart

Warren Buffett has a big collection of Nebraska Cornhusker paraphernalia. "I've always liked sports. I haven't been that good at it. I've been redshirted now for 61 years," the 80-year-old investor said.



LINCOLN, Neb. — It's halftime and Warren Buffett's team is trailing Texas 17-3. As he stands in a concourse at Memorial Stadium on Saturday, a young father approaches.

"Can I get a picture of you with my daughter?" he asks.

Wearing a red sweatshirt with "Nebraska" across his chest, Buffett mugs for the camera. He pulls out his wallet and holds it up to the baby. Then he cups his hand over her tiny ear and whispers, as if passing on a stock tip. Everyone laughs.

Buffett has many titles: "Oracle of Omaha." Third-richest man in the world, with a net worth of $47 billion, according to Forbes. America's favorite investor, whose folksy philosophy built the ultra-successful holding company Berkshire Hathaway. Groundbreaking philanthropist who pledged to give 99% of his wealth to charitable foundations. And sports fan, especially when it comes to his beloved Cornhuskers.

"I've always liked sports. I haven't been that good at it. I've been redshirted now for 61 years," the 80-year-old says with a laugh. "They're just waiting for the right offense."

At other schools, wealthy alums might want their names plastered on stadiums or meddle in football affairs, but Buffett, Class of 1950, isn't your typical billionaire. He's just a fan. If he donates to the Nebraska program, he does so anonymously. Instead, his considerable charity donations have gone to causes such as the Bill & Melinda Gates Foundation to address education, health and poverty problems.

Buffett is also not your typical fan. New York Yankees star third baseman Alex Rodriguez and Miami Heat megastar forward LeBron James, millionaires many times over, have sought his counsel.

There's also another sign of Buffett's influence in the sports world, or at least this corner of it: He's been immortalized with bobble-head dolls.

As part owner of the Class AAA Omaha Royals, Buffett usually throws out the first pitch at the home opener. The most recent Buffett bobble-head — he's wearing a Royals uniform and his arm is extended in mid-pitch — was given away before a game last season. Previous Buffett bobble-heads are collector's items; one is listed on eBay for $169.99.

Buffett says he once wanted to be a sportswriter. He clearly found a more lucrative profession.

Though an octogenarian, Buffett still has a childlike wonder about sports.

"Stan Musial was my baseball hero when I was a kid," Buffett says of the Hall of Fame St. Louis Cardinals first baseman and outfielder. "When I was 11, he came up with the Cardinals, and when I meet him now, it's still a thrill."

When imparting wisdom, Buffett frequently makes sports references. To illustrate a point about the importance of waiting for the right investment, he'll draw from Ted Williams' book, The Science of Hitting, and the lesson of waiting for the right pitch that allowed the Boston Red Sox slugger to become one of baseball's greatest hitters.

As much as Buffett quotes sports, business quotes Buffett far more. Nebraska quarterback Zac Lee, a business major, says in every business class he's taken there's been some mention of Buffett. One of Lee's personal finance classes followed the Oracle's every utterance.

"Whatever he says dictates something big in the market," Lee says.

Because Lee has spent so much time following Buffett, he was thrilled to learn that Buffett was amid the "Sea of Red" following him at Saturday's game against Texas. Lee, last season's starter, replaced struggling Nebraska quarterback Taylor Martinez during the third quarter.

"I'm sure (Buffett) has other things to do," Lee says. "That's what makes Nebraska a special place. The passion people have for football unifies everyone."

Nebraska fans are known for their devotion. The Texas game was the 308th consecutive sellout at Memorial Stadium, a streak that dates to 1962.

Buffett attended his first 'Huskers football game at Memorial Stadium when he was about 8. The boy who would become one of the world's richest men sneaked into the stadium for free, prompted by a friend named Al, whom Buffett recalls as an experienced gate-crasher.

"He told me, 'Now Warren, whatever you do, keep walking,' " Buffett says. "These weren't the days of big crowds, so we went into the game and I'm walking ahead of him, I'm scared silly, and the ticket taker goes, 'Hey kid, where are you going?' and Al said, 'That's OK, he's with me' and we just kept walking."

Now he attends several Cornhuskers games a season and watches the others on TV.

"If we're playing someone like Oklahoma or Texas, you can count on him being here unless there's something big on his schedule that he can't change," Nebraska athletics director Tom Osborne says.

Getting to Lincoln is an easy one-hour drive from Omaha, where Buffett was born and where he built Berkshire Hathaway, whose investments include Gannett, parent company of USA TODAY.

"I think the fact that Warren lives here is just kind of Warren," says Osborne, a friend of Buffett's. "He's not enthralled by the big stage or celebrity. He certainly rubs shoulders with those people, but he's basically a Midwestern person. He's not going to live in an ostentatious house, drive a $100,000 automobile. It's just who he is, and I think people admire that about him."

Adviser to the stars

As most anyone who follows him knows, Buffett has lived in the same house in Omaha for four decades, about 1½ miles from his office. 'Huskers football photos and other sports memorabilia decorate his office. One treasured photo is a picture of Buffett hitting a Bob Gibson pitch almost out of the infield.

"I got a little wood on the ball," he says.

Nine years ago, Gibson, a Hall of Fame pitcher and Omaha native, joined Buffett at the Omaha Royals' home opener. Instead of throwing out the ceremonial first pitch, Buffett handed the ball to Gibson and then stepped into the batter's box. Preparing for one of Gibson's infamous brushback pitches, Buffett shouted, " 'Hey, Bob, they said you would throw at your grandmother's head if she challenged you. But just pretend I'm your grandfather. You like me.' "

Gibson fired a 55-mph fastball, by Buffett's estimate. The Oracle connected. "I didn't run it out," he later quipped. "At my age, I get winded playing a hand of bridge."

In Rodriguez's eyes, Buffett will always be a clutch hitter. When Rodriguez opted out of his contract with the Yankees in 2007, team vice president Hank Steinbrenner said he would not negotiate with the slugger. Buffett told Rodriguez that when business problems arise, it's best to talk about the issue face-to-face.

"Get the agent out of there," Buffett recalls telling Rodriguez. "The agent has a different interest than you." After Rodriguez went directly to Steinbrenner, the Yankees relented. But the team was not interested in offering Rodriguez the 10-year, $300 million guaranteed deal he sought. Buffett suggested a creative solution.

"I said, 'Would you rather have X hundred million and have people booing when you break Barry Bonds' home run record, or would you rather have X minus 50 million? Make it performance-related,' " Buffett said.

The Yankees and Rodriguez agreed to just that — a 10-year, $275 million deal under which Rodriguez can earn another $30 million by reaching various benchmarks in pursuit of Bonds' record of 762 home runs. Rodriguez, 35, now has 613.

A longtime Cornhusker

For about 40 years, the Cornhuskers enjoyed a bull market under coaches Bob Devaney and Osborne, who won a combined five national titles.

After winning a share of the national title in 1997, Osborne retired. His assistant Frank Solich took over but was pushed out after winning 75% of his games in six seasons — good, but not good enough in Lincoln.

A rocky era followed under Bill Callahan, who lasted four seasons before Bo Pelini was hired in 2008.

"Bo Pelini has got it," Buffett says. "Devaney and Osborne couldn't have been two more different guys, but they both really could rally their teams in a different way, and Pelini is the same way."

The No. 13 'Huskers will need it after losing to Texas 20-13; they face No. 15 Oklahoma State in Stillwater on Saturday.

Pelini seethes. Devaney was quick with a quip. Osborne exuded calm confidence.

"When Devaney first came in 1962," Buffett recalls, "he was giving a talk to a Rotary Club, and he said, 'We're working hard, but we have a problem at fullback. We're looking for a guy that's 6-4 and weighs 125 pounds. I know that kinda sounds strange for a fullback, but that's the only kind of guy that can get through the holes the line opens up.' "

Though Buffett has probably repeated the story dozens of times during the last 40 years, he still breaks into a long belly laugh at the punch line.

"Devaney was a stitch. He was a rogue, but he was a lovable rogue." As for Osborne, "He is a quality man, quiet, a low-key guy. You don't have to jump up and down on tables to be a leader. He didn't shout and scream."

Buffett has a tape of the talk Osborne gave at halftime of the 1995 Orange Bowl. With the national title on the line, the 'Huskers trailed the Miami Hurricanes. Osborne laid out the plan for the second half. He told his players Miami would score early, but Nebraska, with its physical play, would have the advantage. Miami would get frustrated, make a key mistake, and Nebraska would own the fourth quarter.

"It happened just like he laid out," Buffett says. "Everyone believed in him. That's what you need."

Buffett seemingly has a quick-witted answer for everything, but when asked to name his favorite Nebraska player, he pauses.

"I go back to the Rose Bowl team in 1941," he says. He mentions Johnny Rodgers, a receiver in the early 1970s, then settles on quarterback Tommie Frazier, who led the 'Huskers to two national titles in the 1990s. "He never got the Heisman, but he was something," Buffett says.

Halftime of the Texas game is nearly over. Before heading to his seat, Buffett glances at a stat sheet and considers the Huskers' two-touchdown deficit.

"Let's hope it's not a double-digit recession," the Oracle of Omaha cracks.

Then he blends into the crowd, just another 'Huskers fan in the Sea of Red.


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BLOOMBERG: Buffett-Backed BYD's Profit Plunges More Than 99% as Sales Drop

BYD Co., the Chinese carmaker backed by Warren Buffett, fell the most in more than five months in Hong Kong trading after third-quarter profit dropped 99 percent amid faltering sales.

The shares declined as much as 7.7 percent to HK$52.50, the biggest drop since May 17, and traded at HK$53.55 as of 10:18 a.m. after BYD posted net income of 11.34 million yuan ($1.7 million) for the three months ended Sept. 30. It was the fourth- biggest decline among 982 stocks in the MSCI Asia Pacific Index.

“Profit was pretty disappointing and well below our estimations,” said Galant Ng, an analyst at Taifook Securities Group Co. in Hong Kong. BYD suffered from declining car sales and higher costs, Ng said in an interview today.

The plunge in profit adds to setbacks for Shenzhen-based BYD, which has delayed plans to export electric vehicles to the U.S. and was ordered to surrender seven facilities earlier this month after China’s government said it built them illegally. The company, the fastest growing automaker in China last year, cut its 2010 vehicle sales target 25 percent in August as it struggled to maintain momentum amid higher taxes on small cars.

The third-quarter profit figure was calculated by Bloomberg News by subtracting six-month earnings from nine-month results announced by the company today in a statement to the Hong Kong stock exchange. Third-quarter sales rose 0.3 percent from a year earlier to 10.3 billion yuan, based on the statement.

Vehicle Sales

Vehicle sales at BYD, 10 percent owned by Buffett’s Omaha, Nebraska-based Berkshire Hathaway Inc., slumped 25 percent in September to 33,085 vehicles even as rivals SAIC Motor Corp. and Dongfeng Motor Group Co. increased deliveries and China’s industrywide passenger-car sales to dealerships rose 19 percent. BYD’s deliveries dropped 19 percent in August.

“Most local brands suffered from the government policy tax revision,” Ricon Xia, a Hong Kong-based senior analyst at Mitsubishi UFJ Asset Management, said before the earnings. BYD’s fourth quarter also “won’t be very strong,” he said.

The carmaker, founded by Chairman Wang Chuanfu, has said it may fail to meet a schedule for shipping electric cars to California. BYD may introduce its E6 electric cars in the U.S. next year, Henry Li, general manager of the company’s export division, said last month, delaying an earlier plan to begin deliveries this year.

Buffett’s Support

Berkshire Hathaway’s chairman Buffett affirmed his support for BYD last month when he visited the automaker in Shenzhen, saying it will be a leader in electric cars. Berkshire owns its stake in automaker through Des Moines, Iowa-based MidAmerican Energy Holdings Co.

China’s vehicle sales may rise 25 percent to 17 million this year, Xinhua News Agency reported on Oct. 11, citing the China Association of Automobile Manufacturers.

The carmaker, which also makes batteries and assembles mobile phones, plans to list on the Shenzhen stock exchange. BYD, whose F3 car is still the best-selling passenger car in China this year, is also expanding its alternative-energy business to jumpstart earnings.

For the nine months through Sept. 30, BYD said profit rose 4 percent to 2.43 billion yuan from 2.34 billion yuan a year earlier. Sales increased 31 percent to 34.5 billion yuan, the company said.

--Liza Lin. Editors: Ian Rowley, Terje Langeland

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BLOOMBERG: Berkshire Names Fund Manager Combs to Help Steer Investments

October 25, 2010, 9:35 PM EDT

By Dakin Campbell

Oct. 26 (Bloomberg) -- Warren Buffett moved one step closer to completing his succession plan, naming a Connecticut hedge fund manager with insurance experience to run a “significant portion” of Berkshire Hathaway Inc.’s investment portfolio.

Todd Combs, 39, becomes an investment manager, Berkshire said yesterday in a statement. Combs manages about $400 million in financial-services shares at Castle Point Capital in Greenwich, Connecticut, according to marketing materials sent to investors. Buffett, the 80-year-old Berkshire chairman and chief executive officer, is searching for candidates to take over his duties when he steps away.

“He runs financial-services investments and obviously Berkshire has a significant percentage of companies” in those sectors, including insurance and banking, said Michael Yoshikami, who oversees about $1 billion at YCMNet Advisors in Walnut Creek, California. Still, “it’s somewhat of a surprise. He’s certainly not one of the people that have been bandied about in terms of taking over the role.”

Buffett has said his responsibilities will be split among at least three people upon his death or retirement. A CEO will oversee the more than 70 operating units assembled by Buffett, and one or more investment heads will be appointed to allocate capital and manage Berkshire’s portfolio.

“For three years, Vice Chairman Charlie Munger and I have been looking for someone of Todd’s caliber to handle a significant portion of Berkshire’s investment portfolio,” Buffett said in the statement. “We are delighted that Todd will be joining us.”

Candidates

Hedge fund manager Li Lu, who helped Berkshire find profits in China, may be in line to help manage investments after Buffett, the Wall Street Journal reported in July, citing Munger. David Sokol, chairman of Berkshire’s MidAmerican Energy Holdings Co., is a possible CEO candidate, Barron’s has reported. Berkshire Chief Financial Officer Marc Hamburg didn’t return calls for comment.

“I could imagine a situation where you have a general investment manager and then equal investment managers in charge of certain portfolios,” Yoshikami said.

Buffett, who took control of Omaha, Nebraska-based Berkshire in 1967, has said he’d look for youth in selecting an investment chief. He launched a succession plan in 2006. He’s said his son, Howard Buffett, would be named chairman. The search for a chief investment officer of the holding company has taken longer.

‘A Long Tenure’

“The directors believe it’s important that my successor have the prospect of a long tenure,” Buffett wrote in his annual letter to shareholders in 2007. “I intend to hire a younger man or woman with the potential to manage a very large portfolio.”

Combs oversaw $405 million at the end of September, with his largest holdings including U.S. Bancorp, MasterCard Inc., Western Union Co. and Chubb Corp., according to the marketing materials. In the 1990s, Combs spent three years as an analyst at the Florida banking regulator and about four years as an analyst for auto-insurer Progressive Corp., the documents show.

“I was surprised to learn that the fund doesn’t own billion-dollar positions because that is what he will have to do,” said Jeff Matthews, author of “Pilgrimage to Warren Buffett’s Omaha” and founder of hedge fund Ram Partners LP.

Berkshire amassed equity holdings of more than $50 billion as of June 30, including Wells Fargo & Co. and American Express Co. stakes, partly by investing premiums from insurance operations. The fixed-income portfolio, valued at more than $30 billion, includes corporate debt and government securities.

Investment Approach

Combs’s “value-oriented” investment approach is focused on both long and short investments in financial services, and bets “will play out over several years,” according to the marketing materials. The fund had declined about 4 percent this year through September.

Castle Point’s fund gained 6.2 percent last year, fell 5.7 percent in 2008, rose 19 percent in 2007 and climbed 13.6 percent in 2006, according to the letter. Castle Point was founded by Combs in 2005 with backing from Stone Point Capital, the private-equity firm whose chairman is former Goldman Sachs Group Inc. executive Stephen Friedman, who was chairman of the board at the Federal Reserve Bank of New York before resigning last year.

Buffett told Fortune magazine that he met Combs through Munger. Combs won’t move to Omaha, and instead will continue to work from Connecticut, Fortune reported on its website.

Combs was head of financial-services investments at Copper Arch Capital LLC, a New York-based hedge fund that closed in 2008. He received an undergraduate degree from Florida State University and a master’s of business administration from Columbia University, Buffett’s alma mater.

“He’s a young guy which is what Buffett wants,” Matthews said. “And anytime Warren Buffett says you’re up to it, that’s the good housekeeping seal of approval.”

--With assistance from Saijel Kishan, Hugh Son and Peter Eichenbaum in New York. Editors: Dan Reichl, Malcolm Scott.

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Friday, October 22, 2010

WALL STREET JOURNAL: Oogling Warren Buffett’s Investment Scorecard

It is good to be the Oracle of Omaha. Warren Buffett gets all the See’s Candies and Cherry Coke he can wolf down, plus the sweetest deal terms on the planet.

We bring this up because Goldman Sachs is weighing whether to pay back Buffett’s $5 billion investment in the investment bank, a stake that has funneled nearly $1 billion in dividends into the (probably frayed) pockets of the legendary investor, Deal Journal colleagues Liz Rappaport and Serena Ng reported. (The 10% yield nets Buffett a cool $15 a second, they figured.)

The deal, struck at the peak of financial panic in 2008, was one in a string of Buffett financial lifelines to blue-chip companies hobbling from bad bets or bad luck during the Great Meltdown. Those investments now look like smart deals – for Buffett, if not for the businesses from which he extracted a premium.

In quick order, Buffett plowed billions of dollars into troubled companies — Goldman, General Electric, Dow Chemical, Swiss Reinsurance, Tiffany – and those horses largely are coming in as winners. Buffett charged steep interest rates of 10% or more, and scooped up shares in some choice companies on the cheap. That is fitting for a man who is so penny-pinching that President Obama had to buy him a fresh tie.

If Goldman repays the $5 billion in preferred shares, they owe Buffett $5.5 billion for the benefit of a roughly two-year rental on the Oracle’s seal of approval. Buffett will still hold warrants to buy 43.5 million Goldman common shares, which he can exercise for $115 a pop, a 39% discount to Goldman’s current stock price of $161. Those warrants are worth between $2.2 billion and $2.55 billion, according to Linus Wilson, a professor at the University of Louisiana at Lafayette.

“It was a good deal at the time, and it looks like an even better deal now that the economy has recovered,” said Wilson, who wrote a research paper on the Buffett warrants in Goldman.

Among his other lifelines, Buffett’s roughly $2.6 billion injection into Swiss Reinsurance came via a bond that pays him annual interest of 12%. Forever. Or he can convert the bond into stock at 25 Swiss francs each. Swiss Re is trading at 46.75 Swiss francs. His $3 billion worth of GE warrants can be exercised at $22.25 each, deeply out-of-the-money given GE’s $16.06 stock price. But don’t feel bad for Buffett. He also secured $300 million in annual dividends for his $3 billion investment in GE.

Buffett, who is no dummy, knows he took what now looks like little risk for a handsome payout. “We’ve put a lot of money to work during the chaos of the last two years. It’s been an ideal period for investors: A climate of fear is their best friend,” he said in the most recent annual letter to Berkshire Hathaway shareholders.

Buffett may be one of the few people in the world who can demand whatever terms he wants for the imprimatur that comes with his appearance on a company’s list of investors. Alice Schroeder, author of the recent Buffett biography, “The Snowball,” used a Google-like verb for the Oracle’s longstanding trend to squeeze sellers for the best price: “Buffetted.”

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WALL STREET JOURNAL: Berkshire Sells Another 88,360 Shares Of Moody's; Stake At 12%

     DOW JONES NEWSWIRES

Famed investor Warren Buffett's Berkshire Hathaway Inc. (BRKA, BRKB) sold another 88,360 shares of Moody's Corp. (MCO) this week, as the conglomerate continues to pare its stake in the credit-rating company.

The sales Tuesday and Thursday are the latest in a series. Berkshire has been shaving its stake in fits and starts for more than a year. Last week, it sold 370,146 shares of Moody's after selling nearly 2 million shares in September.

With the sales this week, Buffett's company now has 28.4 million shares of Moody's, and its stake remains about 12%. The sales, at $27.12 a share, totaled $2.4 million. Moody's had about 236 million shares outstanding as of June 30.

Moody's business suffered during the financial crisis, which some said was partly because of the top grades it and other ratings firms issued to mortgage-backed securities that later underperformed. Buffett himself has testified before Congress that Moody's and the other credit rating agencies shouldn't be singled out for missing the housing-market bubble, saying he missed it too.

After the financial crisis passed, rating agencies have profited as companies returned to the credit markets and seek ratings on their debt.

In its most recent quarterly results, Moody's earnings rose more than expected, as debt capital markets experienced greater volatility in the second quarter compared with the first. The company is scheduled to report third-quarter results Oct. 28.

Moody's shares slid 1.3% to $26.65 in after-hours trading. The stock was flat this year as of the close.

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