(Warren Buffett, Berkshire Hathaway succession story updated for Buffett purchase of liquor distributor, Berkshire holding Iron Mountain's weak quarter)

NEW YORK ( TheStreet) -- Amid the never-ending talk about Warren Buffett'ssuccession plans for Berkshire Hathaway ( BRK.B) is the obvious -- and obviously morbid -- question of whether investors should hold onto Berkshire Hathaway shares once Buffett is no longer running the famed investment company.

Berkshire Hathaway announced on Monday night that it had hired Todd Combs, a hedge fund manager from Castle Point Capital Management, to run a significant portion of the Berkshire Hathaway portfolio.

Combs' appointment came as a surprise, though succession planning at Berkshire Hathaway has been a topic that has nagged Buffett for years. During the summer, chatter spiked in the press that Buffett would be hiring Chinese hedge fund manager Li Lu, who had helped turned Berkshire Hathaway on to Chinese car and battery maker BYD, of which Buffett now owns 10%.

Buffett right hand man Charlie Munger told the Wall Street Journal during the summer that Li was likely to be one of the top Berkshire investment officials. "In my mind, it's a foregone conclusion," Mr. Munger had said.

Buffett himself had told the WSJ that his plan was to hire a number of managers to run various stakes within the Berkshire Hathaway investment portfolio. "I like the idea of bringing on other investment managers while I'm still here," Buffett said at the time of the Li Lu chatter.

Li Lu, though, recently was quoted as saying he has no plans to leave his hedge fund. Berkshire Hathaway said it had hired the CEO of Castle Point after a three-year search to "handle a significant portion of Berkshire's investment portfolio."

In any event, Castle Point's investment philosophy makes Combs a natural for Berkshire: a value-oriented investment shop specializing in financial services. In fact, there is overlap between the Berkshire Hathaway portfolio and Castle Point portfolio, specifically in the case of U.S. Bancorp ( USB) and Wells Fargo ( WFC).

Berkshire Hathaway announced on Wednesday that it was buying a reinsurance business from Canada's Sun Life Financial that backstops $109 billion in life insurance policies. Buffett is among the largest reinsurance players in the world, and Combs, too, has invested in reinsurance businesses, with reinsurer Renaissance Re being among Castle Point's Top 10 holdings, according to published reports.

Comparisons are already being made in the press between Warren Buffett's famous penchant for the pen come annual letter time, and Combs' own literary flair, which the WSJ noted has included references to Charles Darwin's theory of natural selection as a way of talking about investments.

There were scant details on Combs other than the information on the Castle Point web site and the snippets from annual letters he has penned to shareholders. And let's face facts, regardless of what the average retail investor learns about Castle Point, Combs is not going to be a reason for the retail investor to stay in Berkshire Hathaway shares in the post-Warren era. Warren Buffett's public profile is so large -- and he has made it even larger by way of his calculating use of the media -- that there is no way any hedge fund manager is going to step in and put to rest fears among investors that Buffett can be effectively replaced as the Berkshire Hathaway brain trust.
Vote Now on Warren Buffett's Succession Plans
How Are You Trading Berkshire Hathaway Succession?

Buffett can't be replaced. That's a fact. No comparisons between the investing style of Castle Point management or lining up of stock portfolio holdings between Berkshire and the hedge fund is going to end the questions about the outsized influence of Buffett over investment decisions at Berkshire Hathaway.

Investors can make the argument that Buffett has put a process in place that ensures Berkshire Hathaway will continue to thrive well into the future. It can also be argued that Berkshire Hathaway's sheer size and reputation ensure that the company is on sound-footing regardless of success issues. Indeed, to whom did Goldman Sachs turn at the worst moment of the financial crisis? Did they turn to Warren Buffett specifically, or did they merely turn to an investment company that was one of the few companies able to loan them $5 billion?

Buffett may say he was simply a lucky winner of the "ovarian lottery" born at the right place at the right time, but investors may not see it that way.

Investors are not going to pay millions of dollars to have lunch with Todd Combs, as they have paid each year in recent times for the Buffett steak-chomping charity lunch.

Kraft ( KFT) isn't going to modify its financing approach for a purchase of a major confectioner like Cadbury if Todd Combs complains about using company shares as an acquisition strategy.

In fact, not a month passes without some chatter in the press about an investment that Buffett is not happy about, whether it's Kraft, Asian steel giant POSCO ( PKX) or Chinese car marker BYD, which reported a 99% drop in net income on Tuesday as a result of a failed sales strategy. Buffett's recent trip to BYD was all over the press a few weeks back as investors expected the Chinese car company to receive a "talking to" from Buffett.

We are a long way from Todd Combs being in the "talking to" position, and a long way from President Obama invoking the name of Todd Combs in speeches during times of financial unrest to try to calm America from the brink of economic crisis. Though on the other hand, the argument can be made that whoever has their hands on the purse strings of the Berkshire Hathaway investment portfolio automatically is in the "talking to" position, regardless of their last name.

Berkshire has not tried to hide the succession issue, though its public comments have amounted to little more than noting that succession has been a major issue at every recent board meeting. So Monday's announcement was the most significant step yet in Buffett's succession planning.
Vote Now on Warren Buffett's Succession Plans
How Are You Trading Berkshire Hathaway Succession?

Yet for Berkshire Hathaway investors, the question about succession as an effective way to ensure long-term return streams in Berkshire Hathaway shares won't change. No matter how many hedge fund managers Buffett hires and divvies up the Berkshire Hathaway portfolio between, there is only one Oracle of Omaha responsible for the meteoric rise of Berkshire Hathaway over the past four decades.

In any event, Combs is to run one portion of a larger investment portfolio for Berkshire Hathaway, which is a company unlike any other in the diversity of its businesses owned. The Berkshire portfolio includes wholly owned consumer cyclical subsidiaries tied to the brick-and mortar strength of the U.S. economy, from housing supply and mortgage to retail companies. Berkshire Hathaway also has major investments in energy, and of course now the railroad industry. It also features a large stock basket of some of the biggest public companies around the world.

To provide an example of how diverse the interests are within the wholly owned subsidiary segment of Berkshire Hathaway operations, and how difficult it would be to draw a line from Combs to the Berkshire Hathaway top spot, Buffett announced on Thursday his second purchase this year of a southern U.S.-based private liquor distribution company, Tennessee's Horizon Wine and Spirits. Earlier this year, Berkshire made its entrance into the liquor distribution market when it purchased Empire Distributors of Georgia. Both Empire and Horizon Wine and Spirits are now operating affiliates within Berkshire's grocery distribution subsidiary, McLane Co. McLane was notable during the financial crisis for being one of the few consumer-oriented subsidiaries to outperform.

There are notable stocks in the Berkshire Hathaway public portfolio that match up well with a financial services guru from the hedge fund world, like Wells Fargo and U.S. Bancorp. However, the diversity of public companies owned by Berkshire is considerable, with chemical treatment company Nalco ( PTEN) and information storage company Iron Mountain ( IRM) companies in which Berkshire owns between 8 million and 9 million shares. Iron Mountain, which was a Buffett favorite in the first quarter of 2010 -- when the Oracle added one million shares to his stake -- reported a disappointing quarter on Thursday with a loss of 76 cents, as compared to a profit of 21 cents in the same quarter last year.

Just because Combs is being hired as a financial services guru -- and it makes sense given that insurance companies are such a huge part of Berkshire's portfolio strength and operating leverage, and financial services is well represented among the public stocks too -- he's just one piece of a much larger Berkshire Hathaway succession puzzle.

Combs alone can't possibly be expected to exert the weight of Buffett when it comes to the M&A deals that have set Berkshire Hathaway apart, either. Buffett is famous for not using investment bankers, and is also famous for his personal involvement in getting deals done -- one can look back on his involvement with the Mars family in extending a loan to the private confectioner when it wanted to acquire W.M. Wrigley Jr. These aren't the kinds of relationships that Buffett has developed that can be easily replaced or extended by the hiring of one hedge fund manager.

Some longtime Berkshire Hathaway investors from the ranks of money managers have maintained that upon the passing of Buffett, the reaction will be one that would make Buffett smirk: investors will sell in panic. And as Buffett would say and has said many times in the past, buying on fear is usually a good idea. The Berkshire Hathaway institutional holders, therefore, expect another buying opportunity in Berkshire Hathaway shares triggered by succession fears.

It may seem a crude, even an insensitive question, but Buffett is shrewd enough to know it's a legitimate one for investors: Do you think Berkshire Hathaway will be a gold-plated investment regardless of Warren Buffett's day-to-day involvement? Take the poll below, to see what the investors of TheStreet think.

Do you think Berkshire Hathaway will be a gold-plated investment regardless of Warren Buffett's day-to-day involvement?

Berkshire Hathaway succession is a non-issue for investors.
I plan to sell Berkshire Hathaway before "regime" change.
Succession fears will create good entry points for Berkshire shares.

-- Written by Eric Rosenbaum from New York.


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