Buffett Watch

Warren Buffett: It doesn't really take any money to run the largest companies in America

Key Points
  • "You really don't need any money to run these companies," said Buffett on Saturday at the Berkshire Hathaway annual meeting.
  • Apple, Alphabet, Microsoft, Amazon and Facebook have larger market values than his largely industrial conglomerate.
  • Buffett praised them as the "ideal" businesses, even though the legendary investor, until his recent addition of Apple, has not invested in their rise to the top.
Bill Gates and Warren Buffett met in 1991 and have been friends for almost 28 years.
Lacy O'Toole | CNBC

Warren Buffett, who's avoided technology businesses for most of his lauded investing career, pointed out at his annual meeting Saturday that the five companies worth more than his largely industrial conglomerate, Berkshire Hathaway, take basically zero capital to run.

Here's Buffett, 86, to the crowd of an estimated 40,000 in Omaha, Nebraska:

"I believe that probably the five largest American companies by market cap...they have a market value of over two-and-a-half trillion dollars...and if you take those five companies, essentially you could run them with no equity capital at all. None."

Buffett called these kinds of companies, where one gets very high returns for very little capital, the "ideal business." He has generally has invested in more capital-intensive businesses like railroads, utilities and manufacturers during his long tenure at the helm of Berkshire.

At the same meeting, the Berkshire chairman admitted picking the wrong technology stock, IBM, to invest in for his conglomerate, while also acknowledging that he missed his opportunity to buy Google early on because he didn't quite realize how much money they were making from a few clicks.

"You really don't need any money to run these companies, " Buffett added, noting that is very different from the days "when Andrew Carnegie was building a steel mill and then taking those earnings to build another steel mill."

Berkshire is the sixth-largest U.S. company by market value behind Apple, Google-parent Alphabet, Microsoft, Amazon and Facebook.

Buffett, who now owns a large holding in Apple, said people don't appreciate how much the world has changed and how fast it can change further now that the future biggest companies in the world can be built through the use of very little capital and software in a relatively short period of time.