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Warren Buffett's Semi-Secret Stock Picker Lou Simpson Set to Retire
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Executive Producer
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Lou Simpson |
The low-profile 73-year-old man whose stellar stock picks are often attributed to Warren Buffett is calling it quits.
In her Chicago Tribune column, Melissa Harris breaks the big news that media-shy Lou Simpson will retire at the end of the year.
For decades, he's been quietly, independently, and profitably managing the now $4 billion investment portfolio at Geico, the Berkshire Hathaway insurance subsidiary.
Buffett will take over those responsibilities, but there's some speculation Simpson's departure could create an opportunity for Li Lu, the Chinese investor who Charlie Munger says is a "foregone conclusion" to become one of Berkshire's top decision makers on investments.
Buffett says Simpson never sought approval for his buying and selling decisions. Last year, five million Bank of America [BAC
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] shares in Berkshire's portfolio slipped Buffett's mind as he described its bank holdings because it was Simpson who had bought them.
The two men, however, do have very similar investment styles and successes.
In his 2004 letter to shareholders, Buffett said Simpson is "a cinch to be inducted into the investment Hall of Fame," even though sometimes he will "silently disagree" with his decisions. But, Buffett acknowledges in tiny print, "Usually he's right."
In that letter, a table headlined "Portrait of a Disciplined Investor" details how Geico's portfolio suffered annual losses only three times from 1980 to 2004 and beat the benchmark S&P 500 stock index 18 times. Simpson's average annual gain over that period: 20.3 percent vs the S&P's 13.5 percent.
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Buffett tells Harris he wishes Simpson would stay on the job. "Obviously, I would keep him employed till he was 100. I was very surprised when he called me a month ago and said, 'At 74, I'd just as soon turn it over to somebody else.' It was not a happy day at Berkshire. But I'm happy for him."
In its quarterly stock portfolio snapshots, Berkshire doesn't explicitly say if a position is Buffett's or Simpson's.
As a result, says Buffett, "People are always attributing to me what he's doing... If you see a purchase on a company in the $300- to $400-million range, odds are very good that's Lou's. I'm going to want to buy at least $1 billion of whatever it is we buy. So Nike[NKE
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], those things are his, while Wells Fargo [WFC
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], Kraft [KFT
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], those will be mine."
That means Simpson was probably responsible for the smaller Berkshire portfolio moves we saw in the second quarter, including a new $220 million stake in Fiserv [FISV
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]. Conversely, the $1 billion addition to Berkshire's Johnson & Johnson [JNJ
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] position was almost certainly Buffett's doing.
In a conversation described as only his second on-the-record interview since Berkshire bought Geico in 1996, Simpson tells the Tribune's Harris, "My approach is eclectic. I try to read all company documents carefully. We try to talk to competitors. We try to find people more knowledgeable about the business than we are. We do not rely on Wall Street-generated research. We do our own research. We try to meet with top management."
He also tries, and succeeds, at staying under the radar. "So many people broadcast what they buy or sell and it works against them. I'm in favor of people not knowing what we're doing until the last possible time."
Current Berkshire stock prices:
Class B: [BRK.B
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Class A: [BRK.A
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]
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