Warren Buffett warned that the days of “eye-popping” gains for Berkshire Hathaway are over given its huge size and the dearth of attractive investment opportunities.
In his annual letter to shareholders, Buffett said “there remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others”.
“Outside the US, there are essentially no candidates that are meaningful options for capital deployment at Berkshire,” he wrote.
He said that Berkshire should do a “bit better” than the average American corporation but that its enormous size left “no possibility of eye-popping performance”.
“Berkshire now occupies nearly six per cent of the universe in which it operates. Doubling our huge base is simply not possible within, say, a five-year period,” he said.
More important than recording gains, Buffett said Berkshire should operate with “materially less risk of permanent loss of capital”.
The dearth of major investment opportunities means Berkshire’s cash pile rose $39bn over the course of 2023 taking it to a record high of $167.6bn.
Buffett, who has gained a reputation as the “Sage of Omaha” for his investment foresight, has been a director at Berkshire Hathaway since 1965, and has acted as the investment firm’s chairman and CEO since 1970.
Since 1964, Berkshire shares have returned 4.4m per cent, far outstripping the 31,233 per cent gain by the S&P 500.
The letter was the first since the death of Charlie Munger, Buffett’s long-time confidante and a vice chair at Berkshire since 1978. Buffett said “Charlie should forever be credited with being the architect” of Berkshire.