Stewart Horejsi’s business was in a funk. It was 1980, and Brown Welding Supply LLC, his family’s third-generation distributor of hydrogen and oxygen tanks, was battling competitors that were intent on expanding into the corner of Kansas he controlled.
Ted Weschler’s first job after college was at chemical maker W.R. Grace & Co. In 2007, six years after the company filed for bankruptcy, his hedge fund held 15 percent of the shares. That’s when he called Joe Rice.
As a profit-making endeavor, managing other people’s money is hard to beat. The business requires very little invested capital. There are no worries about getting paid in full when the bill comes due, since fund managers control their customers’ money. And lackluster performance is no bar to hefty profits because fees, based on the dollar value of assets under management, are paid even when returns are abysmal.
Last month, the news broke that David Sokol , who was Warren Buffett ’s presumed heir apparent at Berkshire Hathaway Inc., made $3 million from Lubrizol Corp. stock purchases while he was pushing Buffett to buy the company.
Once perceived as a fortress built on low leverage and strong cash flows, BP Plc seems to have managed its balance sheet much the way it ran exploration projects -- dangerously. Projections the company is feeding investors about how much cash it will have to pay claims are finally getting the skepticism they deserve.
Charles T. Munger, vice chairman of Berkshire Hathaway, has been Warren Buffett’s sidekick since 1959. While Buffett made a name for himself as a statesmanlike critic of inept auditors, see-no-evil regulators, fee-gouging money managers and greedy CEOs, Munger gradually emerged from Buffett’s shadow to tongue-lash those same targets mercilessly.