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The hedge fund run by Todd Combs, the man Warren Buffett hired as a successor, exited positions in Blackrock Inc. (BLK) and CME Group Inc. (CME) in the third quarter.
Combs's fund, called Castle Point Capital Management, also exited positions in two other companies, added one, and adjusted the size of its holdings in several other stocks in the company's 24-company portfolio, continuing a habit of moving in and out of investments faster than Buffett typically does. Buffett hired Combs to run a portion of Berkshire Hathaway Inc.'s (BRKA, BRKB) investment portfolio.
Castle Point no longer holds more than half the 31 securities it held on Sept. 30, 2009. The value of the equities disclosed in the portfolio fell to $225 million from $280 million at the end of the second quarter, according to a filing the hedge fund submitted to the U.S. Securities and Exchange Commission Friday.
Many investors who manage more than $100 million are required to disclose most securities holdings to the SEC within a month and a half of the end of a quarter. The filings give the public a relatively fresh look at the portfolios of well-known investors, with Buffett's among those that attract the most scrutiny. Until now, Combs's fund, which is heavy in financial stocks, had attracted scant attention.
But last month, Combs was named by Buffett as one of the people who will eventually replace him at Berkshire, the Omaha, Neb.-based company he transformed from a failing textile mill into a massive conglomerate over four decades. While Buffett hasn't publicly identified the person who will replace him as chief executive, he did say that Combs will oversee part of the company's portfolio of more than $100 billion.
Castle Point's stake in Chicago-based exchange group CME was valued at $14.4 million at the end of the second quarter. The investment in Blackrock, the world's largest money manager, had been valued at $5.2 million.
The hedge fund also exited positions in insurer Hartford Financial Services Group. (HIG) and Leucadia National Corp. (LUK), which is partnered with Berkshire on a commercial loan origination and servicing businesses.
The new stake was in America's Car-Mart (CRMT), which operates auto dealerships and provides financing to its customers, valued at $844,000. The shares have risen about 40% in the past year.
Buffett, who has until Monday to disclose his third-quarter holdings, typically reports fewer changes in Berkshire's portfolio each quarter. Buffett's name is synonymous with buy-and-hold investing, and he has often joked that his ideal investment horizon is "forever." Some of Berkshire's largest holdings--in Coca-Cola Co. (KO) and American Express Co. (AXP)--are ones Buffett first bought for Berkshire decades ago, and their sheer size and the tax implications of a possible sale make the prospect of exiting the positions unpalatable.
All of Castle Point's securities will be sold in short order. With Combs planning to work for Berkshire, Castle Point Chief Financial Officer Andrew Turchin said last month the fund has started an "orderly winding down of positions" and will return investor funds "fairly shortly."
-By Erik Holm, Dow Jones Newswires; 212-416-2892; firstname.lastname@example.org