Buffett Covers Dinner Tab for Fund Manager Who Shared Research

By Tom Cahill

Feb. 12 (Bloomberg) -- It’s usually the investor who pays to share a meal with Warren Buffett. Not so for hedge-fund manager Cara Goldenberg.

The 29-year-old New Yorker sent her stock research to the 79-year-old chairman and chief executive officer of Berkshire Hathaway Inc. in November with a note saying she’d heard he likes to spend the Thanksgiving weekend scouring for investment ideas. Buffett was intrigued enough to invite her and her business partner, Alex Duran, to his headquarters in Omaha, Nebraska, for a chat and dinner, according to two people with knowledge of the meeting.

Sharing research got Goldenberg an audience for which some have gladly paid hard cash. A steakhouse lunch with Buffett, the second-richest American after Microsoft Corp.’s Bill Gates, raised $1.68 million in a June auction for a San Francisco charity. The winning bid in 2008 was $2.1 million, the highest since Buffett began the annual lunches in 2000.

“She hit the jackpot,” said Frank Betz, partner at Warren, New Jersey-based Carret Zane Capital Management LLC, who has invested with Berkshire Hathaway for more than two decades. “It’s praise from Caesar, of course.”

Goldenberg, co-founder of 18-month-old New York-based Permian Investment Partners LP, and Buffett declined to comment. The fund manager’s profile on social-networking site FaceBook features a picture of her holding a grinning Buffett’s wallet.

Goldenberg got her undergraduate degree in chemistry in 2002 from Yale University in New Haven, Connecticut. Her first job out of college was working as a private-equity analyst at New York-based investment bank Morgan Stanley.

Highbridge, Brahman

She jumped to Highbridge Capital Management LLC, the hedge- fund firm owned by JPMorgan Chase & Co., in 2003, and to Brahman Capital Corp., also in New York, a year later. She became that firm’s youngest partner, and oversaw a $2 billion European equity portfolio. She and two former Brahman colleagues started Permian with about $65 million in assets in August 2008 and it now manages about $100 million.

Permian, which is named for the geologic period that ran from about 290 million to 250 million years ago, focuses on what it deems undervalued companies, mostly in Western Europe. The research she sent to Buffett included the rationale behind the top 10 stocks in her portfolio, said the people, who asked not to be identified because they were told the information in confidence.

Goldenberg declined to discuss her investment returns or the stock ideas she shared with Buffett.

Buffett’s Investing Roots

Buffett favors stocks of companies that he believes have long-term advantages over competitors, and he has become the largest investor in Coca-Cola Co., Wells Fargo & Co. and American Express Co.

He has turned Berkshire from a maker of suit-linings into a conglomerate with a market value of more than $170 billion and businesses ranging from insurance to ice cream. His home-spun wisdom and financial success has turned the company’s annual meeting into a multiday pilgrimage, with a record 35,000 attending last May.

Buffett’s first solo investing venture was a hedge fund.

In May 1956, at 25, he started Buffett Associates Ltd. with friends and family as investors, according to “The Snowball: Warren Buffett and the Business of Life,” by Alice Schroeder. That fund was rolled into a separate hedge fund called Buffett Partnership Ltd., which was dissolved in 1970, according to a Fortune article from January of that year by Carol Loomis titled “Hard Times Come to the Hedge Funds.” He’s led Berkshire since 1970.

Buffett has said he invests based on the principle of being fearful when others are greedy, and greedy when others are fearful. He says his ideal investment horizon is “forever.”

‘Good Guys’

One manager who received accolades from Buffett was Walter Schloss, now 93, who like Buffett once worked for the late Benjamin Graham, the father of value investing, before starting his own firm in 1955. Buffett, in Berkshire’s 2006 letter to shareholders, called Schloss “one of the good guys on Wall Street,” adding that he and his son Edwin produced returns that “dramatically surpassed” those of the Standard & Poor’s 500 Index.

“We definitely got calls after that,” Edwin Schloss said in an interview. “Over the years, because Warren was enthusiastic about Walter and the approach we used, we did pick up a number of clients.”

The father and son team had closed their investment partnership in 2002 -- several years before Buffett’s letter -- having decided that stock valuations had gotten too high. The partnership, Walter and Edwin Schloss Associates LLP, generated average annual returns exceeding 18 percent during its 47 years of existence, Edwin said in the interview.

Piles of Mail

Some who have worked with Buffett have also started their own investing ventures. Ian Jacobs, who worked at Berkshire from 2003 to 2009 on investment research and other projects, last March started 402 Fund LP, an Omaha-based fund that focuses on U.S. equity investments. Jacobs declined to provide returns.

Betz of Carret Zane, who has corresponded with Buffett over the years, said he’d been told the CEO gets more than 100 letters a day, and reads them all.

“I don’t know how many times a note to Warren Buffett results in an invitation to come to Omaha,” said Betz.

As for Goldenberg’s: “Boy, it must’ve been one heck of a letter.”

To contact the reporter on this story: Tom Cahill in London at tcahill@bloomberg.net
Last Updated: February 12, 2010 00:01 EST