We recently learned that Ted Weschler, who is one of Warren Buffett's two stock-picking investment managers at Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), bought a sizable amount of Dillard's (NYSE:DDS) stock. To be clear, this purchase was made with Weschler's personal funds, not Berkshire's, but it still makes one wonder what could this high-profile stock-picker possibly see in this particular department store operator. Here's what two of our industry experts think about it.
Jason Moser: Let's, before we wrap up here, Matt, one thing I did want to bring up, because this is not really directly related to Berkshire Hathaway, but this was the headline that hit this morning, which I thought was pretty fascinating. Dillard's, the old department store from the mall -- I mean, we talked about the challenges malls are facing. It was very interesting to see this news that Ted Weschler, who is an investment manager for, of course, Berkshire Hathaway, bought a massive stake in Dillard's. And Dillard's stock is up around 40% right now on this news. It's not a Berkshire Hathaway investment, though, from what I can understand, this is a Ted Weschler investment, correct?
Matt Frankel: It is, and that's what makes it all the more surprising. I wouldn't really put it past Buffett to do like a deep value play like this. But Ted Weschler and Todd Combs, they're two investment managers. They're the ones who, you know, buy Amazon and Snowflake and StoneCo and those types of companies recently. You know, they're not buying Coca-Cola and AmEx, like Buffett is. They're buying the tech plays.
So it kind of surprised me. I mean, it's definitely a value play, in my mind. The thing that I'm -- I mean, obviously, no one knows what he's thinking. But one thing that came to my mind is that maybe it's kind of like the Best Buy (NYSE:BBY) effect. When you think of Best Buy 10 years ago, they had Circuit City competing against them. hhgregg, a few other big ones. What happened? The weaker competitors went out of business. And even though Best Buy was competing with Amazon and e-commerce, there was still some need for a physical electronics-store presence, so they picked up all that market share that Circuit City and hhgregg left behind. And now they're that much stronger as a result.
So Dillard's is -- I mean, no department store is terribly strong right now. But I would put Dillard's, I mean, obviously in a category above, like, J.C. Penney, which is already bankrupt. But even above Macy's or some of the other ones, Dillard's seems to be doing better than all of its peers. So I'm thinking maybe they're thinking it might be like a last man standing type of play. I don't know. What are your thoughts on that?
Moser: Just to me, yeah, it's difficult to really fully reconcile. I mean, I always look at something like this and I feel like, you know what, these guys have access to a lot more information and they're certainly very talented, very smart investors. There's clearly something there that we maybe can't see based on information that they have. I don't know that.
It reminds me of the Buffett-Bank of America deal. This is probably something, this is something where they're able to do something through this investment that your typical retail investor probably wouldn't be able to accomplish, and maybe --
Frankel: I wouldn't be surprised if he got a board seat or something like that out of the deal. [laughs]
Moser: Right, exactly. And maybe that is something to come, but you know what, it's easy to look at that big absolute number and think that's, wow, that's a big absolute number. But remember, I mean, they're dealing with big numbers every day. And so for them it's not necessarily this crazy of a -- at least on the outside, it's not necessarily as crazy looking an investment as maybe some might think. It's a really difficult time for those department stores and malls and retailers right now. So maybe this is a "Hey!" trying to buy a good operator in a bad time. And I certainly appreciate that style of investing and that way of thinking, so it'll be really fun to watch that play out and to see how that ends up working. I don't think Dillard's is some kind of a serious story, though. I think there's probably some value there that it could end up helping to bring out a little bit more value.
Frankel: Well, I mean, it's the same reason. That's the same reason I bought Simon Property Group. It's not because I necessarily think that malls are a great business right now, it's that they're the best in breed, and I think that it's going to consolidate around them and they're going to kind of be the wave of the future, when this is all said and done. Not necessarily that I think the mall business is a great one to be in right now, just like the department store business is clearly not a great one to be in right now. But maybe he knows something there, like you said. [laughs]