Is Ted Weschler The Next Warren Buffett?

Ted Weschler is already proving his value to Berkshire Hathaway as much more than a stock picker. He has a knack for finding value in distressed companies. Since Ted joined Berkshire Hathaway this past January, the former hedge fund manager, at 51 years old, has already gone above and beyond the call of duty.

He’s made a bid for a mortgage business in bankruptcy, brought Berkshire Hathaway further into the newspaper publishing business through one of his negotiations, and he has reviewed potential takeover targets – all while running an equity portfolio worth multiple billions of dollars.

Ted Weschler and Todd Combs, Berkshire Hathaway’s other investment manager, oversee their own chunk of the $86.2 billion stock portfolio that Berkshire Hathaway owns. This past July, Warren Buffett gave each man $4 billion and the sole responsibility to invest it the way they choose.

Weschler is currently expanding his role with the company, and because of it, and the experience that he has, makes him an excellent candidate to take over as head of the company once the 82-year-old Warren Buffett decides to retire. We learn this from Alice Schroeder, the author of The Snowball: Warren Buffett and the Business of Life.

“He has a background in broad capital management, including private equity, mergers and acquisitions, owing businesses, and being directly involved in their management,” she said. Schroeder also mentions that takeovers are going to continue to be a very integral part of Berkshire Hathaway in his future if the company plans to continue growing at its current pace.

Just like Warren Buffett, Ted Weschler has created a style of investing that heavily relies on patience, knowing the ins and outs of any potential investment’s financials, plus a wide range of interests in many industries. We gathered this information through dozens of interviews with business acquaintances, friends and former colleagues of Weschler.

And just like Warren Buffett, Weschler created the bulk of his fortune away from Wall Street. The majority of his 30 year career was spent in his hometown of Charlottesville, Virginia, where he built a private equity firm and then started his own hedge fund later on – named Peninsula Capital Advisors. As you know, Warren Buffett decided to keep the home of Berkshire Hathaway in his hometown of Omaha, even through the entirety of its expansion. The company now employs more than 250,000 people, and it’s worth more than $200 billion.

Ted Weschler divides his time between Charlottesville and Omaha, as he collaborates with the heads of the Berkshire Hathaway operating units, and helps look into potential takeover targets, according to someone familiar with the role that wants to keep his or her identity private.

Weschler did not comment for this story, but he has helped Warren Buffett buy 63 newspapers from Media General (including the Richmond Times-Dispatch), as well as refinance its debt. He also handled the negotiations when Berkshire Hathaway bid on the assets of mortgage lender Residential Capital, which is a bankrupt unit of Ally Financial.

Associates and friends of Ted Weschler – whose father was an executive at A&P – has had a long desire to make lots of money. He wrote in his middle school yearbook that he wanted to become a millionaire, we learned from Chris Hagerty, director of advancement at Cathedral Preparatory School in Erie, Pennsylvania. Weschler also sold cigars to his fellow classmates while in high school, as they traveled to watch the school’s basketball team compete to win the state championship.

Weschler earned his bachelor’s degree from the University of Pennsylvania’s Wharton School, where he went on to work for chemical maker W.R. Grace. For two years, he served as the assistant to J Peter Grace, who led the company for over four decades.

In his role as assistant, Weschler had to attend every budget and operating review meeting with the head of the company, as well as looking over capital requests from natural resources, restaurant, healthcare, chemical and retail operations, which we learned from Terry Daniels, then vice chairman of Grace. “It was a tremendous learning experience. You got to see executives and how they responded,” said Daniels.

Weschler joined Daniels in 1989 when he started his private equity firm, which is now named Quad-C Management, based out of Charlottesville, Virginia. Just like Warren Buffett, Ted Weschler focused on only a handful of companies for his investments, and he held those investments for many years. Before Berkshire Hathaway announced Ted Weschler’s hiring during the second quarter of 2011, the entire hedge fund’s portfolio was only spread out among nine different companies, according to filings. Peninsula owned five of those stocks just three years earlier.

Ted Weschler was responsible for Peninsula, and managed their $2 billion dollar US stockholdings from a small two room office above a Charlottesville Virginia bookstore. He often went to work in shorts and short sleeve T-shirts, we learned from Michael David, a friend and former colleague that currently runs a hedge fund in Akron, Ohio. “He’s still stunned by the fact that he’s become incredibly wealthy,” Hawes Spencer said (Weschler backed him when he started a weekly newspaper in 2002 in Charlottesville, Virginia named Hook). “If I saw a Rolex on his wrist, I would faint.”

Also like Warren Buffett, Weschler made it a point to study lots of company filings and industry publications so he can get an overall edge in any industry. He once told Michael David that he wouldn’t invest in a company unless he studied them and the idea for at least 500 hours. “He’d go on vacation and take 10-Ks and 10-Qs with him,” David said, referring to SEC reports of publicly traded companies. “He still does.” It’s not surprising that he was able land a job with Berkshire Hathaway with that approach. It also didn’t hurt that he won two charity auctions in both 2010 and 2011, which he paid $2.63 million each time to have meals with Warren Buffett.

During 2001, workers claimed that Grace’s asbestos products were causing illnesses and forms of cancer, so they declared bankruptcy. Weschler amassed a stake of roughly 15% of the chemical maker by the end of that year.

He worked with the plaintiff’s attorneys and the company, and he was able to help broker a settlement in 2008 that will create trusts that take responsibility for the asbestos claims, while protecting the shareholders from being wiped out.

“He understood the issues for my clients weren’t all dollars and cents,” says Joe Rice, one of the attorneys working on the case on behalf of the injured workers. “He was a catalyst.”

The company stock has risen around 40 times over since the initial bankruptcy filing, and it was one of the main reasons why Peninsula Capital Management gained over 1000% during the years 2000 through 2011, which is the time that Weschler closed the fund.

As of October 19, 2012, Weschler owns $3.74 million worth of Grace shares, and it’s estimated that they would currently be worth about $225 million.

Warren Buffett mentioned last year that Ajit Jain, 61, his reinsurance lieutenant, would most likely have the support of the board to become the next CEO if he decided that he wanted the job. Schroeder believes that Weschler is also a very good long-term choice if he can prove himself to Buffett. “Warren keeps describing him as an investment manager,” she says. “But the reality is his skills are more comparable to those of Warren himself.”

Here’s the bottom line: as well as overseeing a large part of Berkshire Hathaway’s $86.2 billion stock portfolio, Weschler also reviews takeover targets and negotiates deals.

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