David S. Gottesman, a protégé of Warren Buffett who built a powerful Wall Street investment house, First Manhattan, and presided over it for a half-century, died on Wednesday at his home in Rye, N.Y. He was 96.
His wife, Ruth Gottesman, confirmed the death.
Though Mr. Gottesman credited Mr. Buffett with making him a Wall Street billionaire, he could have scarcely been more different from that world-famous investor.
Mr. Gottesman did not appear on television, kept his political opinions to himself and presided over his privately held First Manhattan Company with no advertising, no commentary and no touting of favorite stocks. The company manages more than $20 billion for its clients, mostly individuals.
“The only time a whale gets harpooned is when he surfaces,” Mr. Gottesman said in an interview for this obituary at his firm’s Park Avenue office in 2013.
After he spent a decade or so drumming up merger and acquisition business for Hallgarten & Company, an old-line Wall Street house, a friend at another firm suggested in 1963 that Mr. Gottesman meet Mr. Buffett, since they had a similar approach to investing. “I was buying value stocks, he was buying value stocks,” Mr. Gottesman said, referring to the purchase of shares in companies with substantial assets selling at big discounts.
The two hit it off over a Wall Street club lunch and a subsequent golf game, launching a close business and personal association that lasted for decades.
“Warren was smarter and knew more than anyone I had ever met in the investment business,” Mr. Gottesman wrote in reminiscences circulated within his family. “I vowed to stay close to him from then on.”
The two men began telephone conversations every Sunday evening in which they discussed investment ideas. Mr. Buffett, not yet in the public eye, provided so many profitable suggestions that Mr. Gottesman, by his account, found it hard to sleep afterward.
From 1963 to 1965 Mr. Gottesman frequently flew to Omaha, Mr. Buffett’s base, meeting him in the afternoon, joining him for dinner and then talking with him until 2 or 3 in the morning. On one occasion, they talked so late that they found themselves locked inside Mr. Buffett’s office building. Mr. Gottesman typically caught early-morning flights back to New York.
Mr. Gottesman began First Manhattan in 1964 with the profits from a venture in which he bought Computer Systems Inc., a bankrupt maker of computers used on missile ranges. Unrealistic projections led to a three-year blood bath of red ink, but the company succeeded in designing a computer to regulate the output of oil refineries.
Schlumberger Ltd., a major oil field company, took notice and sought to buy Computer Systems in its entirety, but Mr. Gottesman and his investors retained 20 percent. The company soared in value when shares were later offered to the public.
But it was his investment in Mr. Buffett’s company, Berkshire Hathaway, of which he was a board member, that constituted the bulk of Mr. Gottesman’s fortune.
“There probably has never been a better return on any stock held for 44 years in the history of Wall Street,” Mr. Gottesman wrote a decade ago, calculating at the time that his shares had grown to 6,000 times their initial value.
In the mid-1960s, Mr. Buffett told Mr. Gottesman that he thought there was more opportunity in buying privately held companies outright than in buying stock-market shares. It happened that Hochschild Kohn & Company, a venerable Baltimore department store, was for sale. (Its president was Ruth Gottesman’s uncle.) Mr. Gottesman called Mr. Buffett.
Within two days the two men had struck a deal. A new company, Diversified Retailing, was formed, with First Manhattan and Berkshire as co-investors.
In a phone interview on Thursday, Mr. Buffett said that deal proved decisive for both of their careers.
Mr. Gottesman, Mr. Buffett and another partner, Charlie Munger, soon decided that they had made a “terrible mistake” with Hochschild Kohn, Mr. Buffett said. Mr. Gottesman, long known as Sandy to his intimates, took charge of reselling the company, which he managed to do at only a small loss.
“Sandy made the sale for us — I didn’t know who to sell it to,” Mr. Buffett said.
With the money from that sale, Diversified bought more shares in Berkshire Hathaway, which went on to thrive. The two companies later merged. Berkshire Hathaway is now a sprawling conglomerate with a market capitalization of more than $590 billion.
“He saved our asses in Diversified — me, Charlie and himself,” Mr. Buffett said of Mr. Gottesman. “He kept that stock, and now it’s worth a lot of money — billions.”
Mr. Buffett fondly recalled many years of trips and long conversations with Mr. Gottesman. “Absent Sandy doing anything financially for me, we would have been the best of friends,” he said.
David Sanford Gottesman was born in Manhattan on April 26, 1926. His family moved to New Rochelle, N.Y., when he was a child. His father, Benjamin, was a banker and investor. His mother, Esther (Garfunkel) Gottesman, a supporter of Jewish and Zionist causes, helped arrange the acquisition of the Dead Sea Scrolls for Israel.
“I was not a good student, more interested in making money,” Mr. Gottesman said. He peddled Collier’s magazine door to door, hiring neighborhood children to help, and hawked beetle traps at a hardware store.
With no interest in college, he enlisted in the Army, which, after sending him to study engineering at Princeton, shipped him out to fight in the South Pacific in 1945, when he was 19 and World War II was drawing to an end. Attached to an artillery battery, he climbed trees to string communications lines from the front to fire command at the rear.
After the war ended and he was honorably discharged, Mr. Gottesman conducted his studies in a hurry, attending Trinity College in Hartford, Conn., but enrolling in Harvard Business School before he had received his bachelor’s degree. He later received it in the mail.
In the summer of 1948, he met Ruth Levy, who was soon to enter her freshman year at Mount Holyoke College. They married in 1950, the year Mr. Gottesman graduated from Harvard. He headed for Wall Street, even as most classmates opted for the higher pay that then prevailed in industry.
In addition to Ms. Gottesman, he is survived by the couple’s sons, Robert, the executive chairman of First Manhattan, and William; their daughter, Alice; and six grandchildren.
The Gottesmans’ charitable donations included a bicycle path circling Jerusalem and the Gottesman Hall of the Planet Earth at the American Museum of Natural History — a glaring exception to Mr. Gottesman’s reluctance to embrace the spotlight.