Can I Invest in Berkshire Hathaway?

As the company presided over by legendary investors Warren Buffett and Charlie Munger, Berkshire Hathaway is a sought after company for new and old investors alike.

The company owns massive stakes in many iconic American brands, including Coca-Cola, Apple and Bank of America.

New investors often wonder whether they can invest their money alongside Buffett in Berkshire Hathaway. Here’s what you need to know about buying Berkshire Hathaway stock and whether the company is a good investment today.

Can I Invest in Berkshire Stock?

Yes, you can invest in Berkshire Hathaway because it is a publicly traded company on the New York Stock Exchange.

To buy shares in Berkshire Hathaway, you will need to set up a brokerage account, fund it and create a purchase market or limit order to buy Class A or B shares of Berkshire Hathaway, symbols, BRK.A and BRK.B respectively.

Here are more details on that process.

How Do I Invest in Berkshire Hathaway Stock?

The process of buying Berkshire Hathaway stock is similar to buying any other stock. To invest in Berkshire Hathaway, you’ll need a brokerage account with the necessary funds to buy your shares.

To buy, simply log into your brokerage account and place an order for Berkshire Hathaway to be executed at the earliest available opportunity.

One thing that’s important to note about Berkshire, however, is that you will have to choose between two different share types when investing. Berkshire Hathaway issues both Class A and Class B shares.

Class A shares are those issued when the company originally went public. These shares carry voting power and have about 1,500 times the ownership concentration of the lower-priced Class B shares.

For the vast majority of investors, Berkshire Hathaway Class B shares (NYSE:BRK.B) will be the more accessible choice.

What Is the Minimum Investment in Berkshire Hathaway?

The minimum investment you can make in Berkshire Hathaway will depend largely on your brokerage.

If your brokerage requires you to invest in full shares, the minimum investment would be the price of one Berkshire share. At the time of this writing, B shares in Berkshire trade at $310.52, while A shares trade at $469,137.44.

With brokerages that offer fractional shares, however, the minimum investment can be much lower. Some brokerages allow investors to buy as little as $1 in stock at a time, making it possible to invest in tiny pieces of individual shares.

Your brokerage’s minimum fractional share investment will determine the lowest dollar value you can use to invest in Berkshire.

Is Berkshire Hathaway a Risky Investment?

While all stocks carry the risk of loss, Berkshire Hathaway is among the best-managed large companies in the United States from a financial perspective.

The company had a cash reserve of $129 billion at the end of 2022. This gives the it a massive cash cushion to protect its own businesses during market downturns while also continuing to invest in new companies and stocks.

Berkshire’s ability to weather difficult economic times is best demonstrated by the events of the 2008 financial crisis. While many other businesses in the finance industry found themselves badly overleveraged, Berkshire Hathaway was able to ride the storm out with minimal difficulty. During the worst days of the financial panic, Warren Buffett even invested $5 billion of Berkshire’s cash in Goldman Sachs to stabilize the struggling bank.

With all of this said, it’s important to remember that Berkshire Hathaway is still subject to short-term market volatility. In 2022, the company posted a total loss of $22.8 billion, largely due to the sharp downturn in the stock market that occurred over the course of the year.

It’s important to note that loss is a function of accounting principles – when shares owned by Berkshire decline in value, Buffett and his team are required to report it as a loss, even though it’s not crystallized until shares are sold.

Even with this large “paper” loss, the company still sharply outperformed the broader stock market. Berkshire shares gained roughly 4 percent, compared to an 18 percent loss in the S&P 500.

Investors who buy Berkshire Hathaway today should also understand that their returns will be more modest than those who bought earlier in the company’s lifetime.

Warren Buffett has publicly addressed this point many times, pointing out that Berkshire cannot generate the enormous returns it once did due to its gigantic capital base. As such, those who invest in Berkshire now should have the expectation of slow, steady returns instead of rapid growth.

Is it Good to Invest in Berkshire Hathaway?

For conservative investors seeking steady, long-term growth, Berkshire Hathaway is among the most popular and practical investments.

The company is also one of very few that has managed to outperform the S&P 500 on a consistent basis. Since 1965, Berkshire’s total returns have averaged 19.8 percent annually. For comparison, the S&P 500 averaged 9.9 percent over the same period, just half of Berkshire’s average return.

One group of investors who may not find Berkshire Hathaway particularly appealing are those seeking dividend income from their portfolios. Despite its size and massive cash flows, Berkshire has never paid a dividend. This is because Warren Buffett still firmly believes that Berkshire’s shareholders are better served by reinvesting cash into the company.

Berkshire has, however, rewarded shareholders by pursuing a steady program of share buybacks. From 2020 to 2022 alone, Berkshire repurchased nearly $60 billion of its own stock. These buybacks are expected to continue into 2023, concentrating the ownership stakes of remaining shareholders and encouraging higher stock prices as a result.

There are also indications that Berkshire Hathaway could be trading below its fair value in today’s market. The most obvious of these signs is the company’s continued buyback program itself. Warren Buffett is famous for buying stock in companies he believes to be undervalued, and his investments in his own company are no exception. The stock also trades at only about 16 times forward earnings, compared to an overall P/E ratio of 22 for the S&P 500.

For most new investors and those looking for steady buy-and-hold stocks, Berkshire Hathaway still appears to be an attractive investment. While the company almost certainly won’t see the same returns it did in its early years due to its present size, Berkshire’s massive cash reserve and prudent management could keep it growing sustainably for many years to come.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.