In his recent annual letter, Warren Buffett acknowledged that Berkshire Hathaway, one of America's largest conglomerates, may only slightly outperform the average American company due to its substantial size and limited buying opportunities. The company, with a record $167.6 billion in cash reserves in the fourth quarter of 2023, has been facing challenges in identifying significant acquisition targets to make a substantial impact.

Despite holding a record amount of cash, Berkshire Hathaway has struggled to find sizeable deals, with the last major acquisition being the purchase of insurer and conglomerate Alleghany for $11.6 billion in 2022. The conglomerate's venture into the energy sector with a 28% stake in Occidental Petroleum also fell short of the anticipated "elephant-sized" target that Buffett had been eyeing for years.

Amidst the lack of attractive investment options in the U.S., Buffett noted that there are essentially no candidates outside the country that could meaningfully contribute to Berkshire's capital deployment. The company did, however, build a 9% stake in five Japanese trading companies - Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo, with the intention to hold them long term.

Despite these challenges, Berkshire Hathaway's stock has been performing well, having reached consecutive record highs above $620,000 for Class A shares, boasting a market value exceeding $900 billion, and outperforming the S&P 500 with a 16% gain in 2023 and 2024. Buffett remains realistic about the company's growth prospects, stating that Berkshire's diversified portfolio of high-quality businesses should provide only slightly better performance than the average U.S. company, with any further gains being wishful thinking.