Investors can decide to purchase Class A or Class B shares of Berkshire. But which has better performance?
If you follow Warren Buffett and his conglomerateBerkshire Hathaway (BRK.A 0.99%) (BRK.B 0.91%), then what I'm about to tell you is probably obvious. But if you are new to this stock, it may surprise you to learn that there are two different types of Berkshire Hathaway stock: Class A and Class B.
Class A shares refer to the original Berkshire stock, which has been publicly traded since 1965 and is much more expensive than Class B shares. Berkshire issued Class B shares in 1996 to make Berkshire's stock more accessible to smaller investors.
Both classes of shares attract different shareholders for different reasons. But these days you can purchase either, given the power of technology and how it has made purchasing fractional shares much easier. Does it matter which Berkshire shares you purchase? Let's take a look.
Class A versus class B
Class A shares widely outperformed the broader market between 1965 and 2021, generating a compound annual gain of 20.1% over that time compared to a compound annual gain of 10.5% for the S&P 500 (including dividends), which is a broader benchmark for the market.
With such a long history of extraordinary performance, Class A shares now trade at more than $403,000 each. Meanwhile, Class B shares currently trade at roughly $266. Back in the day, it was a lot harder to get and trade fractional shares, which is why Buffett and Berkshire saw more of a need.
One big difference between the two classes of shares today is that Class A shares have much more voting power. Class B shares only carry 1/10,000th of the voting rights of Class A.
Furthermore, Buffett declared that Class A shareholders will never have to go through any kind of stock split. Meanwhile, Class B shareholders can endure stock splits and did a 50-for-1 stock split in 2010 to make the shares even cheaper. Another difference is that Class A shareholders can convert their shares into an equivalent amount of Class B shares. However, Class B shareholders cannot do the same and would need to sell their shares and then purchase Class A.
In terms of performance, let's go back to the introduction of Class B shares on May 6, 1996, and see how they stack up to Class A since that time. The calculation for Class A is fairly straightforward because there was no stock split and Class A shares made total gains of 1,090% since 1996.
Class B shares of Berkshire opened at about $1,020 per share and rose to about $3,353 prior to the stock split, which dropped shares to about $70.
But after accounting for the stock split and with shares at $266 now, Class B shares made total gains of about 1,050%, slightly underperforming Class A shares.
Does it matter which class you own?
While Class A shares outperformed, I do not see a huge difference in which class you decide to invest in -- remember, you are investing in the same company with the same business model and fundamentals.
Deciding between the two depends more on who you are as an investor and what you are looking for. Smaller investors who may be more passive or newer to investing will likely opt for the Class B shares, as it will generally make buying and selling the stock easier.
Shareholders who follow Berkshire's every move a bit more closely might be more interested in purchasing Class A shares for the enhanced voting power, as well as the visibility of knowing there will never be a stock split. Either way, I don't really think you can go wrong when investing in as strong a company as Berkshire Hathaway.
Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway (B shares). The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
FAQs
Key Points. Berkshire created two share classes in 1996 to make investing more accessible. Both share classes offer essentially the same exposure to the company's success. Most investors are better off sticking with Class B shares for their flexibility and affordability.
Is it better to buy Berkshire A or B? ›
A-share owners had the right to convert to B shares on a 30-for-1 basis. However, B shares carried slightly weaker voting rights, with each share having 1/200th of the voting rights of an A share. But B shares still conveyed ownership in Berkshire, and at a lower price.
What is the point of owning Berkshire Hathaway stock? ›
Key Points
Berkshire delivers solid returns with less volatility. It owns a high-quality portfolio of companies and publicly traded stocks. Buffett's company has a massive cash position that it can use to capitalize on opportunities in the next downturn.
What is The Motley Fool's top 10 stock advisor? ›
See the 10 stocks
The Motley Fool has positions in and recommends Alphabet, Amazon, Chewy, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, and Uber Technologies. The Motley Fool recommends the following options: short March 2024 $67.50 calls on PayPal. The Motley Fool has a disclosure policy.
Should I buy class A or B shares? ›
Class A shares typically have more voting rights and may offer higher dividends, but they are also typically more expensive. Class B shares, on the other hand, may have fewer voting rights and lower dividends, but they are typically less expensive.
What will brk b be worth in 10 years? ›
According to the latest long-term forecast, Berkshire Hathaway price will hit $450 by the end of 2024 and then $500 by the end of 2025. Berkshire Hathaway will rise to $600 within the year of 2027, $700 in 2028, $800 in 2030, $900 in 2033 and $1000 in 2035.
Are Class B shares worth anything? ›
Class B mutual fund shares are seen to be a good investment if investors have less cash and a longer time horizon. To avoid the exit fee, an investor should typically remain in the fund for five to eight years.
Why not invest in Berkshire Hathaway? ›
Berkshire Hathaway doesn't pay dividends
In the comparison to the S&P 500 Index above, the performance figures include reinvested dividends. That is a benefit for the S&P 500, but has no impact on Berkshire Hathaway's performance because the company doesn't pay a dividend.
What are the cons of Berkshire Hathaway? ›
Arguably, the biggest drawback to Berkshire stock now is that it will underperform if the market continues to boom. Berkshire shares have performed better in 2021, but they had been underperforming the S&P 500 prior to that – understandably so, given that Buffett has been sitting on an ever-growing pile of cash.
Is Berkshire Hathaway a long-term buy? ›
Berkshire stock is still a long-term buy for this reason
Over the last decade, Berkshire's price-to-book ratio has risen by roughly 15%. That increase in valuation multiple accounts for part of the stock's positive performance, but only a small part.
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Who is the smartest stock investor? ›
Warren Buffett is widely considered to be the most successful investor in history. Not only is he one of the richest men in the world, but he also has had the financial ear of numerous presidents and world leaders.
Is Berkshire Hathaway class BA a good investment? ›
Berkshire's stock performance has generally been solid, increasing at a 9.5% (13.3%) CAGR during 2018-22 (2013-22), compared with a 9.4% (12.6%) average annual return for the S&P 500 TR Index. At the end of June 2023, Berkshire had approximately $166 billion in insurance float.
Is it worth investing in Berkshire Hathaway? ›
Its Relative Strength Rating of 84 means it has outperformed 84% of stocks in terms of price performance over the past 12 months. Berkshire Hathaway stock held strong in 2022, making a slight gain compared to a loss of more than 19% for the S&P 500.
What is Warren Buffett buying? ›
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Mar 4, 2024
Berkshire Hathaway's sheer size makes it much more difficult to find companies that make a difference to its bottom line. Berkshire Hathaway (BRK. A) (BRK.B) stock over the past 20 years has almost precisely equaled the return of the S&P 500 SPX.
Is it a good time to buy Berkshire Hathaway? ›
Berkshire stock is still a long-term buy for this reason
There's no doubt that right now isn't the best time in history to buy Berkshire stock. But as we'll see, that doesn't mean shares aren't a buy. Over the last decade, Berkshire's price-to-book ratio has risen by roughly 15%.
What is the best way to buy Berkshire Hathaway stock? ›
Here's the simple way to buy Berkshire Hathaway stock:
- Open a brokerage account.
- Add money to the account.
- Search for Berkshire Hathaway stock within your brokerage account's platform using the ticker "BRK. B."
- Fill out the order, indicating whether you want to buy the stock in dollars or shares.
- Submit the order.
With its 3-star rating, we believe Berkshire stock is fairly valued compared with our long-term fair value estimate. We've increased our fair value estimate to $600,000 per Class A share from $555,000 after updating our forecasts for the company's operating businesses and insurance investment portfolio.
