Buffett: T-party

Washington, March 4: Warren Buffett introduced the American public to his latest hot pick yesterday — not a dry railway or insurance stock, but a cool financial adviser.

Tracy Britt Cool is a 29-year-old business school graduate who already has been appointed as chairwoman of four of Buffett’s Berkshire Hathaway subsidiaries.

She is part of a triumvirate of Berkshire executives Buffett likes to refer to as the “three Ts” — along with the former hedge fund managers Todd Combs and Ted Weschler — and yesterday she took her first big step into the media spotlight.

“She’s done a perfect job,” Buffett said yesterday of his latest protege, adding that much of Cool’s role at Berkshire consisted of doing “all kinds of things that I don't want to do, so I hand them to her”.

The Berkshire chairman and chief executive hired Cool, who grew up on a farm in Kansas, in 2009, when she was just 25.

She first met him three years earlier while on a student visit to Berkshire’s Omaha headquarters and later wrote to him asking to spend some time with the company.

After she had completed a summer research project for Berkshire —- “It allowed Warren and I to have an opportunity to have a variety of discussions about business, management, investing. And those were all great for me” — she was hired to watch over his investment in a commercial mortgage finance company.

Buffett, 83, said Cool was “a great repository of information on the companies we own”.

Last year, he walked Cool down the aisle at her wedding, standing in for her late father. And at the Berkshire HQ, she has an office next to his.

Berkshire made a record profit of $19.5 billion in 2013, but its book value per share, Buffett’s favourite metric, rose by only 18.2 per cent, much less than the 32.4 per cent rise in the Standard & Poor’s 500 index, meaning that he missed his goal of increasing his company’s book value more rapidly than the S&P 500 index over the past five years. The results raise the question as to whether Berkshire, with a market capitalisation of $285.54 billion, can continue to beat the markets and make large acquisitions now that it is so big.

It is probably too early to tell. It is not, after all, the first time the company has underperformed. Buffett’s decision to sit out the dot-com boom led to his company’s worst ever relative showing in 1999; but it stood him in good stead when the bubble burst and markets dived.

Buffett also noted in his annual shareholder letter “over the stock market cycle between year-ends 2007 and 2013, we over-performed the S&P”. He added that he was looking for big acquisition targets, or “elephants” as he calls them. He remained optimistic about the future for American business, despite the present global economic and political turmoil, particularly the crisis in Ukraine.

“When I got up this morning, I actually looked at a stock on the computer the trades in London that we’re buying, and it’s down and I felt good,” he said. He added that he had bought the stock on Friday, but that it was cheaper today. He “absolutely” intended to buy more. He would not name the company, but said only that it was an “English” stock.

In spite of his popularity, Buffett knows he needs to show that he is more than a one-man band and that he has a team of pretenders able to take on the Berkshire Hathaway mantle. The “three T’s” are being pushed front and centre to fulfill this demand.

Combs, 43, was appointed in 2010, a surprise move for the manager of a small and little-known Connecticut-based hedge fund called Castle Point Capital. Like Cool, Weschler, 52, formerly a managing partner at Peninsula Capital Advisers had long put “meeting Warren Buffett” on his bucket list. He entered a charity auction in which the top prize was lunch or dinner with Buffett and won twice with bids totalling $5.2 million. After the second lunch in 2011, Buffett surprised him by offering him a job.

“It was the last thing on my mind,” Weschler said yesterday. “I didn’t want to be dismissive, I mean this guy’s like a hero, you can’t just say ‘no way’.”

Buffett said he received thousands of letters from people seeking jobs and chose his top lieutenants on the basis of character, as well as intellect.

“Things jump out at you to some extent,” he said. “People do give themselves away.”