"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," Buffett, said in his annual shareholder letter, which the company released alongside its results on Feb. 24. "Outside the U.S., there are essentially no candidates that are meaningful options for capital deployment at Berkshire. All in all, we have no possibility of eye-popping performance."
Despite ramping up Berkshire's acquisition machine in recent years, the company has still struggled to find many of the big-ticket deals that burnished Buffett's reputation, leaving him with more cash than he and his investing deputies could quickly deploy.
He struck an $11.6 billion deal to buy Alleghany and has snapped up shares in Occidental Petroleum — an investment Buffett said that he expects to hold "indefinitely" but has no plans to purchase or manage the company. The investor also boosted Berkshire's stake in five of Japan's trading houses last year after their profits surged — a move that fueled a rally in their stock. Berkshire's year-end unrealized gain from those investments was $8 billion, or 61%, it said.
Buffett has also continued to lean on share repurchases amid the dearth of appealing alternatives, saying the measures benefit shareholders. The firm spent $2.2 billion on buybacks in the fourth quarter, bringing the total for the year to about $9.2 billion.
Berkshire shares, which gained 15% last year, are up 17% so far in 2024 and have touched a record in each of the past seven trading days.
"Buffett is observing a lack of attractive opportunities — and with a rise in Berkshire's share price, even repurchasing its own shares is less attractive," Jim Shanahan, an analyst with Edward Jones, said. "But that's his pattern: Nothing will really happen and then he goes big."
Buffett has a long history of stepping in to aid firms in crisis, leveraging his cult investing status and financial heft to help them restore confidence and rebound from their difficulties. In his letter on Feb. 24, Buffett said Berkshire is ready to step in should financial disaster strike — noting such market seizures may offer it an "occasional large-scale opportunity." That's a tacit reminder from Buffett that problems do arise, according to Cole Smead, president of investment firm Smead Capital Management.
"Buffett is whispering when he used a megaphone in the past," Smead said. "He's whispering: Be very careful — problems do arise. He's saying we'll be ready, but that Berkshire will only be a buyer when no one else is a buyer."
