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By Jason Stipp | 10-26-2010 04:53 PM

Sizing Up Berkshire's New CIO Heir Apparent

Morningstar's Paul Larson outlines what we know about the new frontrunner to succeed Buffett as head of investments.

Jason Stipp: I'm Jason Stipp for Morningstar. Succession has always been a big issue among those who follow Warren Buffett and Berkshire Hathaway, and these folks got some intriguing news on Monday when Berkshire announced that it hired Todd Combs, a little known hedge fund manager, to be the investments manager at Berkshire.

Here with me to offer his take on the news is Morningstar's Paul Larson. He is an equity strategist and also the editor of Morningstar StockInvestor.

Thanks for joining me, Paul.

Paul Larson: Glad to be here.

Stipp: So, this news, I think, was surprising to a lot of us. Who is this guy? What have you've been able to find about him over the last day or so?

Larson: Well, I didn't know who he was up until the announcement was made, and I would say that probably 999 out of 1,000 people that go to the Berkshire Hathaway Annual Meeting also had no idea who he was. You mentioned he is indeed a hedge fund manager at a private equity complex in Connecticut and has a focus on financial services, investing in those types of names over the last couple of years, and he's racked up a fairly decent track record, which is obviously something that I think gave him the inside line on this job.

Stipp: Sure, I want to dig into his holdings in just a moment, but, first, there were a few contenders short-listed that we had talked about even in a video here earlier. What happened to those folks? Why did this person suddenly emerge and where are the other people who were considered frontrunners?

Larson: Right, well, I'd say the frontrunner before was Li Lu, a Chinese-American hedge fund manager, someone who was at Tiananmen Square and introduced Berkshire Hathaway to BYD, and since news broke that he was indeed the frontrunner and Charlie Munger singling him out as someone that was most likely going to be in this role, he had since pulled his head out of the ring, and I think I would surmise that it may have been the very intense media attention on this role that maybe was something that he did not like.

And I would say that he maybe thought that he could make more money elsewhere because someone taking on this role of being Buffett's successor may make millions, may be even tens of millions of dollars, but as a high-profile money manger elsewhere they can make even more than that and that may have weighed on his mind.

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