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Investing Specialists

Berkshire Hathaway Shakes Up Its Stock Portfolio

Lou Simpson's retirement and the hiring of Todd Combs could lead to more changes.

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By Greggory Warren, CFA | Senior Stock Analyst

When we relaunched Ultimate Stock-Pickers last year, we made a point of including a few insurance companies in our list of top managers because, unlike their peers in the mutual fund business, the portfolio managers at insurance companies are not impacted by investor redemptions during poor market environments. They also tend to be a bit more long-term oriented than fund managers, investing their portfolios according to the time horizons and payout profiles associated with the product lines underwritten by their firms. While fixed income tends to dominate the investment portfolios of most insurance companies, as the asset class provides a steady stream of cash flows and (in most markets) less risk than equities, there is always room for stock holdings, which provide the potential for capital appreciation, in these portfolios.

Of the four insurance companies in our Investment Manager Roster-- Berkshire Hathaway (BRK.A)(BRK.B),  Markel (MKL),  Alleghany (Y), and Fairfax Financial (FRFHF)--Berkshire Hathaway is probably the best known, owing to the legendary status that Warren Buffett and Charlie Munger have with investors. Buffett has been involved in Berkshire's investment portfolio for more than forty years, while Munger has been contributing to investment decisions at the firm for nearly as long. This type of longevity is rare among asset managers, and speaks to the success Berkshire has had finding investments that not only meet the needs of its business, but which allow Buffett and Munger to demonstrate their investing acumen. We'd be remiss, though, if we didn't mention the contribution made by Lou Simpson, who has overseen the investment portfolio at GEICO, Berkshire's auto insurance subsidiary, for more than thirty years. While Simpson has operated with relative autonomy, his management style has not been all that different from Buffett's--researching the companies he invests in extensively, taking large positions in firms he considers attractively valued, and running a fairly concentrated portfolio.

The Morningstar Ultimate Stock-Pickers Team does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.