Buffett told Berkshire (BRKA) shareholders in his annual letter to them Saturday that they should brace for more megadeals along the lines of last February’s $26 billion buy of railroad Burlington Northern Santa Fe.

“Our elephant gun has been reloaded, and my trigger finger is itchy,” Buffett said.

Buffett may not strike you as much of a hunter. In the public’s mind, Buffett is a gatherer of blue-chip stocks such as Coca-Cola (KO) that he buys on the cheap and holds forever. His success in that endeavor has been immeasurably aided by his access to cheap funding via the insurance companies that Berkshire runs.

But while the insurance-funded investment business still accounts for much of Berkshire’s value, the future  lies elsewhere. More and more of Berkshire’s gains come from a growing stable of 68 non-insurance companies, ranging from giant Burlington Northern to niche operators like Business Wire and See’s Candies.

“For the past 10 years we have seen a clear strategic shift toward buying wholly owned businesses over publicly traded stocks,” said Whitney Tilson, a Berkshire shareholder and value investor who runs the $23 million Tilson Focus fund.

Why? Size is one factor. As Buffett has often lamented, the bigger Berkshire gets the more difficult it becomes to move the needle with a winning investment. The scale of the firm’s $158 billion investing portfolio “is absolutely an anchor on performance,” says Tilson.

For now, the value of that portfolio dwarfs the flows coming from the operating businesses. The investments were worth $94,730 a share at the end of 2010, Saturday’s letter says. Per-share pretax earnings at Berkshire’s noninsurance companies were worth $5,903 per share.

But the operating-company earnings stream is plenty valuable in its own right – a point Tilson makes in a slide show on his web site.

Even at a conservative multiple of, say, 7 times earnings, Berkshire’s operating businesses alone are worth $42 billion before taxes. That exceeds the market value of warehouse retailer (and Berkshire holding) Costco (COST), for instance, though the numbers aren’t strictly comparable because of the tax treatments.

Moreover, the earnings stream expanded at a 20% annual clip over the past decade – compared with a just 6.6% yearly increase in the value of the investment portfolio.

The earnings expansion stands to pick up in coming years if Berkshire succeeds in finding more big deals. The motivation is clear.

Consider the Burlington Northern purchase, which was half again as big as the previous biggest Berkshire acquisition, the 1999 purchase of insurer General Re. Buffett said in last year’s letter that the decision to make the cash-and-stock deal was “a close one,” because he doesn’t like issuing Berkshire stock.

But he said in Saturday’s letter that the railroad is “working out even better than I expected,” boosting Berkshire’s after-tax earnings capacity by more than 30%. Thanks in part to the strong flow of Burlington Northern earnings, Berkshire now can expect to generate around $12 billion in profits in a typical year, Buffett says.

That number may take a hit this year and next as some of the sweet deals Berkshire negotiated during the financial crisis – including a $5 billion investment in Goldman Sachs (GS) and a $3 billion purchase of General Electric (GE) preferred stock — run off.

But losing a few hundred million in dividends here and there hardly slows the torrent of cash that comes pouring into Berkshire every day. Buffett said in last year’s letter that he liked Burlington Northern in part because it gave Berkshire a way to put $22 billion to work in one shot.

Now, just a year after it swallowed the railroad, Berkshire is back to $38 billion in cash and cash equivalents.

With Buffett having sworn off dividends and stock repurchases, that money has to go somewhere. So which elephants might Buffett be after?

Tilson, for one, puts long odds on another megadeal. He notes that Berkshire already owned nearly a third of Burlington Northern before saying in late 2009 it would acquire the rest.

He views serial purchases of somewhat smaller, closely held businesses – along the lines of Berkshire’s 2006 purchase of the Israeli metalworking company Iscar or the ongoing acquisition of the Pritzker family’s Marmon Group – as a better bet.

“I think Buffett would love to buy 10 more Iscars,” said Tilson. “I’m sure he would love to buy Mars at the right price,” he adds — though there’s no sign that sweet deal is likely to present itself any time soon.

So 2011 will find Buffett in his familiar posture of looking for an opening – whatever that takes the form of an elephant or something less grand. 

As Tilson says, “I don’t think he spends a lot of time thinking about how he has to have any particular deal. It’s much more opportunistic than that.”

Also on Fortune.com:

• Berkshire reports a runner-up year
• The Lou Simpson effect
• Berkshire cleans up on derivatives bet
• The Buffett succession horse race

(A member of FORTUNE’s staff, senior editor at large Carol Loomis, edits the chairman’s letter in Berkshire’s annual report.)