Berkshire Hathaway (BRK.B) started off as two separate textile companies: Berkshire Cotton Manufacturing Company (incorporated 1889) and Hathaway Manufacturing Company (incorporated 1888). They merged in 1955 and continued to produce textiles, but the combined company couldn’t win back the industry leadership position that Berkshire and Hathway enjoyed at the start of the 20th century.
In 1962, Warren had not yet established himself as one of the greatest investors of all time, but he had certainly demonstrated a particular talent for spotting promising stocks. He picked up on a pattern in the pricing behavior of Berkshire Hathaway stock and bought in. However, he soon realized that Berkshire Hathaway would never really turn itself around.
At first, Buffett thought he might sell off his Berkshire Hathaway shares, but something stopped him. He went the other way and bought more – lots more. Once he had a controlling stake in the company, he forced a change in leadership and went on to turn the company around himself.
Berkshire Hathaway didn’t stay in the textile industry much longer. Instead, under Buffett’s direction, it became a holding company for a wide range of assets. Berkshire Hathaway bought financial service companies, utilities, retailers, and real estate – in whole or in part – and the company grew at a rapid rate.
In 1965, the original Berkshire Hathaway shares were priced at $19. By 1983, the share price hit $1,000. It reached $10,000 in 1992, and $100,000 in 2006. On the last trading day of 2021, those shares (now known as Berkshire Hathaway Class A) were priced at $452,700.
Berkshire Hathaway stock has clearly been a good investment, but the average investor isn’t prepared to pay almost half a million dollars for one share of anything. Does that mean Berkshire Hathaway stock is only for institutional investors or the very wealthy? If not, how to buy Berkshire Hathaway stock?
Berkshire Hathaway Class A vs B Stock Differences
Very few stocks trade for hundreds of thousands of dollars per share. They split long before they reach that price to ensure shares are accessible to all investors – not just the institutions and the affluent. However, Warren Buffett has always been firm in his opinion that Berkshire Hathaway stock should not be split because he believes that the price point limits investors to those who share his core philosophy: buy and hold.
The no-split strategy threatened to backfire in the early 90s when Berkshire Hathaway stock hit five figures. Retail investors wanted to be a part of Berkshire Hathaway’s success, which created a market for funds that promised to match Berkshire Hathaway’s returns.
Of course, any such funds would only be able to mirror Berkshire Hathaway’s moves retroactively, and Buffett worried that this would lead to unnecessary losses for small investors and paint the Berkshire Hathaway brand in a negative light. Buffett decided to offer lower-priced Class B shares to prevent unscrupulous fund managers from profiting at retail investors’ expense.
Specifically, in his 1996 letter to shareholders, Buffett said that the Class B shares were launched…
…in response to the threatened creation of unit trusts that would have marketed themselves as Berkshire look-alikes. In the process, they would have used our past, and definitely non-repeatable, record to entice naive small investors and would have charged these innocents high fees and commissions…
…Berkshire would have been burdened with both hundreds of thousands of unhappy, indirect owners (trust holders, that is) and a stained reputation.
In 1996, the company released a limited supply of Class B shares, and Class A shareholders had the opportunity to convert one Class A share to 30 Class B shares if they wished to do so. By the end of 2021, Class B shares were priced at just under $300 per share.
Berkshire Hathaway’s Investment Potential
Warren Buffett is a brilliant investor, and he has successfully identified and purchased dozens of companies, in whole or in part, at value prices.
In some cases, the companies in Berkshire Hathaway’s portfolio grew because they had a good product or service and a smart strategy for increasing market share. In other cases, Buffett turned struggling companies around through his deep understanding of effective business practices and strong leadership.
Along the way, Buffett has made some errors, and Berkshire Hathaway has had down years. However, despite a few mishaps, Berkshire Hathaway’s Class B stock has increased nearly 1,150 percent since 1996. Though nothing is guaranteed, nearly everyone agrees that Berkshire Hathaway stock will continue to deliver long-term.
Does Berkshire Hathaway Class B Stock Fit Into Your Portfolio?
The beauty of Berkshire Hathaway Class B stock is that it fits into any portfolio. Each share represents instant diversification because Berkshire Hathaway’s own holdings are carefully selected to represent a variety of industries. That means a single share can withstand market ups and downs on its own, without the need for individual investors to balance Berkshire Hathaway holdings with other types of assets.
At the end of third-quarter 2021, Berkshire Hathaway’s top five holdings included the following:
- Apple – 42.78 percent of total portfolio
- Bank of America – 14.61 percent of total portfolio
- American Express – 8.66 percent of total portfolio
- Coca Cola – 7.15 percent of total portfolio
- Kraft Heinz – 4.09 percent of total portfolio
In addition, Berkshire Hathaway has a collection of wholly-owned subsidiaries that include GEICO Insurance, Dairy Queen, and Fruit of the Loom.
How Much To Invest In Berkshire Hathaway Stock?
Berkshire Hathaway Class B stock offers instant diversification, but that doesn’t necessarily mean it should be the only asset in your portfolio.
There are certain features that Berkshire Hathaway stock doesn’t have – for example, it doesn’t pay dividends – which could impact whether you choose to branch out into other stocks in addition to Berkshire Hathaway.
Buffett intends for Berkshire Hathaway stock to be a long-term investment, and if history repeats itself, the stock will grow in value over time.
If you have short-term investment goals and a high tolerance for risk, you might consider adding shares that are expected to grow quickly. Examples include PayPal, Peloton, Shopify, Voyager Digital, and MercadoLibre.
How To Buy Berkshire Hathaway Class B Stock
There is no trick in terms of how to buy Berkshire Hathaway Class B stock. Simply create or log into your online brokerage account. Most brokerage platforms have a search tool where you can enter the company name or ticker symbol, in this case BRK.B, to get detailed information about the stock.
Choose the “trade” or “buy” button and enter the number of shares you wish to purchase. You will then select the type of order you want to place. Market orders are executed at the market rate in effect at the time the order is processed, while limit orders allow you to specify the most you are willing to pay per share. If the stock price goes over your limit by the time the trade is ready for execution, it will not be processed.
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.