In a letter to shareholders in Berkshire Hathaway, Mr Buffett's publicly quoted investment company, he says that the risk of "overpayment surfaces periodically and, in our opinion, may now be quite high for purchasers of virtually all stocks".
Included in this perception are Mr Buffett's so-called "inevitables", the companies he has identified as ones that will inevitably succeed over the next 10 years because of their domination of the markets in which they operate.
"Investors making purchases in an overheated market need to recognise that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid," warns the second-wealthiest man in the world.
He also puts investors in Berkshire Hathaway on notice that the 24 per cent annual compound growth rate they have seen over the past 32 years is unlikely to be maintained.
"Our past rates of growth cannot be matched nor even approached: Berkshire's equity capital is now large - in fact, fewer than 10 business in America have capital larger - and an abundance of funds tends to dampen returns," he explains.
"Whatever our rate of progress, it will not be smooth ... for it will be influenced in a major way by fluctuations in securities markets."
Mr Buffett's annual statement is always keenly awaited by financial markets, both for news of the companies he is targeting, and for its down-to-earth but carefully considered analysis of investment issues.
The guru's large and committed following will not be disappointed by this latest offering, which is written in characteristically light-hearted, idiosyncratic and self-effacing manner and for the first time is published on the Internet.
"Though it was a close decision, Charlie Munger [vice-president] and I have decided to enter the 20th century and accordingly we are going to put future quarterly and annual reports of Berkshire on the Internet." Mr Buffett wryly remarks.
The company's corporate jet, the Indefensible, gets a prominent mention, if only to demonstrate that after a year in which net worth rose 36 per cent, or $6.2bn, corporate costs remain far below those of most investment houses.
"Our after-tax headquarters expense amounts to less than two basis points (one fiftieth of 1 per cent) measured against net worth. Even so Charlie Munger used to think this expense ratio outrageously high, blaming it on my use of Berkshire's corporate jet, the Indefensible," Mr Buffett muses.
"But Charlie has recently experienced a counter-revolution; with our purchase of FlightSafety, whose major activity is the training of corporate pilots, he now rhapsodises at the mere mention of jets."
Shareholders are again invited to join Mr Buffett after the annual meeting in Omaha, Nebraska, at his favourite steak house, Gorat's.Reuse content