UPDATE 1-Buffett says 'sprawl' is good, but may not be good enough

Sat Feb 28, 2015 1:03pm EST
 
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(Adds quote on investment bankers)

By Jonathan Stempel

NEW YORK Feb 28 (Reuters) - Warren Buffett wants to buy more businesses to add to Berkshire Hathaway Inc's "sprawl," but cautioned it may not keep the company he has run for 50 years from evolving into something rarely used to describe it up until now: average.

In his annual letter to shareholders, Buffett on Saturday said Berkshire's huge balance sheet gives him the power to funnel capital to some of the more than 80 operating units that deserve it, while its decentralized structure makes it the "home of choice" for many businesses looking to sell.

"Berkshire is now a sprawling conglomerate, constantly trying to sprawl further," Buffett wrote. "In an operating sense, Berkshire is not a giant company, but rather a collection of large companies."

That sprawl, including 9-1/2 businesses that would on their own make the Fortune 500 - Berkshire owns half of ketchup maker H.J. Heinz Co for instance - may limit its power to outperform.

Indeed, that power has been waning.

Berkshire's book value per share, Buffett's favored growth measure, has after taxes risen less than the Standard & Poor's 500 index including dividends, pre-tax, in five of the last six calendar years, after dwarfing the index in the prior 44 years.

Its stock price has also slightly lagged the index since the end of 2008, the company said.   Continued...