Here's What Warren Buffett's Successors Are Putting Their Money Into

Berkshire's fund managers Todd Combs and Ted Weschler are betting big on media companies. Both Liberty Media and Viacom have very strong managers who are committed to returning substantial value to shareholders in the long-run.

Mar 21, 2014 at 7:00AM

Source: Flickr / Jana Vanden Eynde.

It's always good idea to follow what the best investors are putting their money into, and there are probably no two more intriguing names right now in Berkshire Hathaway's (NYSE:BRK-B) Todd Combs and Ted Weschler, the successors-in-waiting to the Oracle of Omaha, Warren Buffett. From recent filings, we can see that they are betting big on two media companies: Viacom (NASDAQ:VIAB) and Liberty Media (NASDAQ:LMCA)

Betting on Liberty's holdings
Liberty Media has been a Berkshire holding for a while, and the company has earned good returns from its investment. Berkshire owns slightly above 5% of Liberty Media shares, which amounts to $775 million, an investment likely made by Ted Weschler, as he owns shares of Liberty Media under his name according to Liberty's 13G filing. However, Berkshire did trim its stake in Liberty Media by a modest 5% in the last quarter and recorded some gains. 


Source: Company website.

The media holding company under the stewardship of John Malone recently decided to break-up its stock into two tracking stocks -- Liberty Media Group and Liberty Broadband Group. And this creation has been well received by the market: the company stock price shot up 7%, as investors expect the discount to net asset value to shrink from current levels after the stock splits.

Liberty will not be pursuing its plans to fully own Sirius XM, but will be raising cash for consolidating the cable industry through the offering of subscription rights to Liberty Broadband Group shareholders. The company will be utilizing the cash to help Charter Communications expand and grow its customer base and revenues. And the company's Liberty Media Group will be benefiting from share repurchases of its major holding, Sirius XM, which has $2.2 billion in authorized shares to repurchase including $340 million from Liberty.  

John Malone's Liberty has always utilized complex financial structures for making deals and creating value for shareholders. And this recent move will benefit believers in the company, thanks to cable consolidation, share repurchases, and the acquisition of subscription rights to own the tracking stock of the Broadband Group at a 20% discount to its 20 day volume-weighted average trading price. 

Big share repurchases at Viacom
Buffett has always been a vocal proponent of share buybacks of companies with rock-solid businesses, adequate financial resources and a stock price at a discount to intrinsic value. And Viacom meets all three of these factors, making it a company that will generate a lot of value for shareholders through share repurchases.


The company's highly valued entertainment content is broadcast to more than 160 countries and reaches more than 700 million households. Viacom's media line-up of MTV, Nickelodeon, Comedy Central, VH1, Nick Jr., etc., are a must-have more than the line-ups of most cable providers, and its film studio, Paramount, produces high-quality films as well.

And Viacom still has $8.87 billion left from its share buyback program yet to be executed. As the company will be repurchasing what amounts to roughly 23% of its outstanding market cap, the stock price of Viacom will go higher over time. And the market certainly agrees with Berkshire Hathaway, as the shares of Viacom are sitting near 52 week highs. 

The key takeaway
It's never a good idea to follow marquee investors blindly. But investors should get an idea of how experts like Buffett and his investment managers are thinking. Berkshire's investment bets in the media space demonstrate the company's belief in leveraged share repurchases, as both Liberty Media and Viacom are buying back a lot of shares by adding debt to their balance sheets. As a result, the insurance giant will benefit from its media holdings in the long-run. 

Ishfaque Faruk owns shares of Liberty Media.. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway and Liberty Media.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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