A knack for finding value in distressed companies is helping Ted Weschler carve out a role at Berkshire Hathaway (BRK/A) that goes beyond the stockpicking job he was hired for. Since joining Warren Buffett’s company in January, the 51-year-old former hedge fund manager has made a bid for a bankrupt mortgage business, negotiated a deal that pushed Berkshire deeper into newspaper publishing, and reviewed possible takeover targets—in addition to running a multibillion-dollar equity portfolio.
He and Berkshire’s other investment manager, Todd Combs, oversee a portion of the company’s $86.2 billion stock portfolio. In July, Buffett said that each man would have responsibility for about $4 billion. Weschler’s expanding role and experience show why he could one day be a candidate to run the company that Buffett, 82, built over four decades through stock picks and acquisitions, says Alice Schroeder, author of The Snowball: Warren Buffett and the Business of Life and a Bloomberg View columnist. “He has a background in broad capital management, including private equity, mergers and acquisitions, owning businesses, and being directly involved in their management,” she says. In addition, Schroeder adds, takeovers will be more important to Berkshire in the future if the company is going to continue to grow.
Like Buffett, Weschler has cultivated an investing style that relies on patience, an encyclopedic knowledge of company financials, and interest in a range of industries, according to interviews with more than a dozen friends, former colleagues, and business acquaintances. Also like his boss, Weschler amassed a fortune far from Wall Street, spending most of his three-decade career in Charlottesville, Va., where he helped build a private equity firm and later started his own hedge fund, Peninsula Capital Advisors. Buffett has kept Berkshire in his childhood home of Omaha, even as the company expanded to employ more than a quarter of a million people and its value rose to more than $200 billion.
Dividing his time between Omaha and Charlottesville, Weschler has collaborated with the heads of Berkshire’s operating units and helps assess possible takeover targets, according to a person familiar with his role who asked not to be identified because the matter is private. Weschler, who declined to comment for this story, also helped Buffett buy 63 newspapers from Media General (MEG), including the Richmond Times-Dispatch, and refinance its debt. When Berkshire made bids for the assets of mortgage lender Residential Capital, the bankrupt unit of Ally Financial, Wechsler handled the negotiations.
Friends and associates say Weschler, whose father was an A&P executive, has long had a desire to make money. In his middle school yearbook, he said he wanted to be a millionaire, according to Chris Hagerty, director of advancement at Cathedral Preparatory School in Erie, Pa. In high school, he sold cigars to classmates traveling to watch their basketball team compete for the state championship.
After earning a bachelor’s degree at the University of Pennsylvania’s Wharton School, Weschler went to work for chemical maker W.R. Grace. Among his assignments was spending two years serving as assistant to J. Peter Grace, who led the company for more than four decades. The role entailed attending every budget and operating review meeting with the industrialist and looking over capital requests from heath-care, restaurant, retail, natural resources, and chemicals operations, according to Terry Daniels, then vice chairman of Grace. “It was a tremendous learning experience,” Daniels says. “You got to see executives and how they responded.”
When Daniels started a private equity firm now called Quad-C Management in Charlottesville in 1989, Weschler joined him. Ten years later he left Quad-C to start Peninsula. Like Buffett, Weschler concentrated his investments in a handful of companies, many of which he held for years. At the end of the second quarter last year, before Berkshire announced Weschler’s hiring, his fund’s U.S. stock portfolio was spread across a mere nine companies, filings show. Peninsula had owned five of those stocks three years earlier.
Weschler ran Peninsula, which had about $2 billion in U.S. stockholdings, from a two-room office above a bookstore in Charlottesville. His work attire often was a short-sleeve shirt and shorts, according to Michael David, a former colleague and friend who now runs a hedge fund in Akron. “He’s still stunned by the fact that he’s become incredibly wealthy,” says Hawes Spencer, whom Weschler backed when he started a weekly paper in Charlottesville called the Hook in 2002. “If I saw a Rolex on his wrist, I would faint.”
Like Buffett, Weschler sought an edge by studying company filings and dozens of other publications to understand industries. He once told David that he didn’t make investments unless he’d spent 500 hours studying the idea. “He’d go on vacation and take 10-Ks and 10-Qs with him,” says David, referring to the reports publicly traded companies file to the Securities and Exchange Commission. “He still does.” That approach may have helped Weschler land his job at Berkshire. It didn’t hurt that he won charity auctions in 2010 and 2011 for meals with Buffett, bidding $2.63 million each time.
In 2001, Grace declared bankruptcy after workers claimed its asbestos products had caused cancer and other illnesses. Weschler amassed a stake of about 15 percent in the chemical maker by the end of the year. Working with plaintiffs’ attorneys and the company, he helped broker a settlement in 2008 that will create trusts to take responsibility for asbestos claims and won’t wipe out shareholders. “He understood the issues for my clients weren’t all dollars and cents,” says Joe Rice, an attorney who represents injured workers in the case. “He was a catalyst.” The stock has risen about 40-fold since the bankruptcy and was one of the largest contributors to Peninsula’s gain of more than 1,000 percent from 2000 through 2011, when Weschler closed the fund. The 3.74 million Grace shares he personally owned as of last December, according to a regulatory filing, would be worth about $225 million at the Oct. 19 closing price.
Buffett said last year that Ajit Jain, 61, his reinsurance lieutenant, probably would have the board’s support to be the next chief executive officer if he were interested in the job. Schroeder says Weschler could be a good longer-term choice if he proves himself. “Warren keeps describing him as an investment manager,” she says. “But the reality is his skills are more comparable to those of Warren himself.”