Berkshire: Pinch Hit Weschler

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We have argued for years that the biggest mistake being made by Berkshire Hathaway was not giving shareholders access to the thoughts and investment discipline of their two talented stock pickers, Ted Weschler and Todd Combs. After all, Buffett calls the shareholders “partners” and has not allowed his partners to understand anything about the strategies and results of upwards of $30 billion of shareholder capital.

Thanks to Allan Sloan from The Washington Post, we have learned more about Ted Weschler from the footnotes at ProPublica and Sloan’s phone call to Mr. Weschler than we have ever learned from the Berkshire annual reports or the Berkshire Hathaway annual meetings. Where has any of this been in the Berkshire Hathaway footnotes? Weschler has made himself a centi-millionaire just from his personal investments in his Roth IRA. These funds came from converting his traditional IRA and paying a whopping $26 million in taxes to have future gains grow tax free. Here is how Sloan explained these circumstances:

1978 Berkshire Hathaway Letter to Shareholders

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Key Points:

• Accounting issues of consolidating results between wholly owned and partially owned companies
• Optimism about long term equity holdings 
• Inability to predict short term equity prices
• Discussion concerning textile business being a commodity business with no differentiation between competitors
• Expresses Sentimental attachment to textile business, management,and workers
• Insurance business produces excellent results
• Difficult to "buy good insurance businesses"
• Stock selection criteria; businesses we can understand, with favorable long term prospects, operated by honest and competent people, priced attractively
• Buys stocks at perceived low valuations in large concentrations
• Prepared to wait for market to re-value share holdings higher
• Discussion of disposition retained earnings of companies in portfolio

1977 Berkshire Hathaway Letter to Shareholders

Link to Letter

Key Points:

• Measure of management performance should be return on equity capital.
• Continued struggles in the textile business; some related to industry and some self inflicted.
• Shareholder questions about staying in textile business.
• Buffets sentimental comments about management and workforce.
• Discusses the successes and mistakes of Berkshires's Insurance business.
• Emphasizes the non-proprietary nature of Insurance business and the importance of managers.
• Emphasis on long term holding of investments and description of stocks as "small pieces of a company"
• Selection criteria for stocks