Warren Buffett says Berkshire may only do slightly better than the average company due to its sheer size

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Warren Buffett says Berkshire may only do slightly better than the average company due to its sheer size

Warren Buffett, Chairman and CEO of Berkshire Hathaway

Lacy O'Toole | CNBC

Berkshire HathawayWarren Buffett said his sprawling conglomerate would only marginally outperform the average American company because of its sheer size and lack of buying opportunities that could have influence.

The Omaha-based giant — owner of everything from BNSF Railway to Dairy Queen and 6% of Apple — has by far the largest net worth of any American company, now reaching 6% of the net worth of all S&P 500 companies, Buffett said in his statement released Saturday Annual letter.

“There are only a handful of companies left in this country that have the ability to make a real difference at Berkshire, and they have been chosen endlessly by us and others,” Buffett wrote. “Some we can appreciate, others we can’t. And if we can, they have to be attractively priced.”

The last major deal Berkshire completed was to buy insurer and conglomerate Alleghany for $11.6 billion in 2022. The “Oracle of Omaha” also acquired a 28% stake in the energy giant Occidental Petroleum, but rules out a purchase of the entire company. While these moves were significant, they fell short of the expectations of an “elephant-sized” goal that Buffett had set for years.

Berkshire had a record $167.6 billion in cash on hand in the fourth quarter.

“There are essentially no candidates outside the US that represent a viable option for capital deployment at Berkshire. “All in all, we have no way of achieving stunning performance,” Buffett said.

Berkshire has built a 9% stake in five Japanese trading companies – Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo – which Buffett wants to own for the long term.

Buffett, 93, said Berkshire's group of diversified quality companies should perform “slightly better” than the average U.S. company, but more than that was unlikely.

“With our current business mix, Berkshire should perform slightly better than the average American corporation and, more importantly, also operate with significantly lower risk of permanent loss of capital,” Buffett said. “Anything other than 'slightly better' is wishful thinking.”

Berkshire recently hit consecutive record highs, with its Class A shares trading at over $620,000 and its market value exceeding $900 billion.

The conglomerate's stock has gained about 16% in 2024, more than double the return of the S&P 500, after rising 16% in all of 2023.