Bloomberg News

Berkshire Takes Liberty Media, DaVita Stakes as Weschler Joins

February 15, 2012

Feb. 15 (Bloomberg) -- Berkshire Hathaway Inc. took stakes in Liberty Media Corp. and dialysis-facility owner DaVita Inc. after billionaire Warren Buffett hired Ted Weschler to help manage investments.

Weschler oversaw investments in the two firms while running Peninsula Capital Advisors LLC, the hedge fund he wound down after agreeing to join Buffett. The new Berkshire stakes, listed yesterday in a filing disclosing U.S. equity holdings as of Dec. 31, probably reflect Weschler’s influence, said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, in an interview.

Buffett hired Weschler and Todd Combs to manage a portion of Berkshire’s portfolio as part of the Omaha, Nebraska-based firm’s succession plan. Buffett, 81, who is chairman, chief executive officer and head of investments, is preparing the company for a second generation of leaders after accumulating the largest stakes in Coca-Cola Co. and Wells Fargo & Co.

“Warren Buffett is a brilliant selector of people,” Bruce Berkowitz, who oversees one of the largest stakes in Berkshire through his Fairholme Capital Management LLC, said in an interview last week. The biggest challenge for Weschler and Combs is “look at the shadow you’re in,” he said.

Buffett has said he’ll focus on managing Berkshire’s largest stockholdings and count on Combs and Weschler to make smaller investments. Combs, 41, who joined Buffett’s firm in 2010, last year added holdings in companies such as CVS Caremark Corp., Intel Corp. and General Dynamics Corp. Berkshire said in September that Weschler, 50, would join the company this year.

Liberty Media

Buffett’s firm had 1.7 million shares of Englewood, Colorado-based Liberty Media and 2.7 million shares of DaVita, according the filing. Liberty Media closed at $85.59 in New York trading yesterday, and DaVita at $84.75.

Liberty Media, controlled by billionaire John C. Malone, said in November it will combine tracking stocks of its Liberty Starz and Liberty Capital units and increase share buybacks to make the stock more appealing to investors. The company rose 18 percent in the fourth quarter.

Liberty Media, which operates and owns interests in media, communications and entertainment businesses, has assets that include the Starz pay-TV business. In August, it agreed to invest $204 million in book-retailer Barnes & Noble Inc.

Berkshire boosted its stake in El Segundo, California-based DirecTV to 20.3 million shares from about 4.2 million at the end of September, according to the filing. The satellite TV provider closed at $45.85 yesterday and was among the largest holdings at Weschler’s Peninsula Capital Advisors at the end of June.

The Liberty Media and DirecTV stakes are reminiscent of Buffett’s bet on Capital Cities/ABC Inc., before it was purchased by Walt Disney Co. in 1996, said the University of Maryland’s Kass.

Free Cash Flow

“Buffett was attracted to communications companies,” he said. “They threw off a lot of free cash flow.”

Holdings of some of Combs’s picks rose in the quarter. Berkshire’s stake in CVS Caremark, the largest provider of prescription drugs in the U.S., rose 26 percent to 7.1 million shares, valued at $290 million at the end of December. Holdings of Intel, the world’s largest chipmaker, increased 23 percent to 11.5 million shares, worth $279 million on Dec. 31. The stake in General Dynamics, which makes Abrams battle tanks and Gulfstream business aircraft, rose 27 percent to 3.88 million shares, valued at about $257 million.

Berkshire reported no holding of Exxon Mobil Corp., the world’s largest energy company, compared with about 420,000 shares at the end of September. Exxon closed yesterday at $84.67. Buffett didn’t immediately respond to a request for comment sent to an assistant.

‘First-Class Businesses’

The holdings listed in Berkshire’s filing had a combined value of more than $66 billion as of Dec. 31. Berkshire’s filings are monitored by analysts and investors for insight into Buffett’s strategy.

Buffett’s firm seeks to “increase its ownership of first- class businesses” with a preference for buying them outright, he said in an article posted on Fortune magazine’s website last week.

Buffett contrasted this approach with investments in gold or U.S. Treasuries. Bonds are subject to inflation risk which can erode value over the long run, while making money from gold relies on an expanding pool of “fearful” buyers, he wrote. Investments in companies face fewer limitations, he said.

“Over any extended period of time this category of investing will prove to be the runaway winner among the three we’ve examined,” Buffett wrote. “More important, it will be by far the safest.”

--With assistance from Andrew Frye, Laura Marcinek, Rick Green and Andrea Ludtke in New York. Editors: Dan Kraut, Dan Reichl

To contact the reporter on this story: Noah Buhayar in New York at Nbuhayar@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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