What’s the difference between Berkshire Hathaway Class A and Class B shares? | Hatch | Help Centre (2024)
Aside from the price, the main difference between Berkshire Hathaway Class A shares and Class B shares is that Class A shares can never be split, while Class B shares can. “Splitting” is a practice in which a company can take it’s currently issued stock and multiply it by X amount by issuing X shares for each 1 that’s outstanding. Think of it like slicing a pizza: you start with one pie worth $20, and after cutting it into 8 slices you still have $20 worth of pizza, but in smaller pieces. You can then buy and sell those smaller pieces independently instead of having to move a whole pie at a time. Class B shares allow investors with less money to still get their piece of the pie.
Berkshire Hathaway has split their Class B shares once - in January 2010 when they issued a 50-1 split, where each investor woke up with 50x the shares they fell asleep with, but worth the same total value. This split brought the price for one BRK.B share down from $3,286 to $76.
Some other differences between BRK Class A & B are:
Voting Rights: Class B shareholder has 1/10,000th of the voting rights of a Class A shareholder since each Class A share represents a larger piece of the Berkshire Hathaway pie (there are only 709,840 outstanding Class A shares, compared to 1.39B Class B shares).
Performance: BRK.A & B will not consistently have the same performance, because they will still have different market demand; if BRK.A increases in value by 5% next year, there’s no guarantee that BRK.B will grow at the same rate.
Aside from the price, the main difference between Berkshire Hathaway Class A shares
Class A shares
In finance, a class A share refers to a share classification of common or preferred stock that typically has enhanced benefits with respect to dividends, asset sales, or voting rights compared to Class B or Class C shares.
Class B shares are known as a type of classification of common stock which may have more or fewer voting rights as compared to Class A shares. In the event of bankruptcy, Class B shares may have a lower repayment priority as well.
This difference is often only pertinent for shareholders who take an active role in the company. Nevertheless, because of the voting rights, A-shares are often more valuable than B shares. Some companies even have three or more share classes, in some special circ*mstances.
Class A shares generally have more voting power and higher priority for dividends, while Class B shares are common shares with no preferential treatment. Class C shares can refer to shares given to employees or alternate share classes available to public investors, with varying restrictions and voting rights.
Berkshire has two classes of common stock designated Class A Common Stock and Class B Common Stock. Each share of Class A Common Stock is convertible, at the option of the holder, into 30 shares of Class B Common Stock.
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.
The most obvious difference between Berkshire Hathaway's A class and B class shares is the price. Trading around 400 a share, BRKB stock may be considered relatively expensive, BRKA stock is the most expensive on the market. It currently trades north of 600,000 per share.
If you retain B Shares you will receive cash dividends on the B Shares twice a year fixed at 75 per cent of the interest rate known as LIBOR. The example below will give you an idea of the sort of return you can expect should you decide to retain your B Shares.
Class B shares are a classification of common stock that may be accompanied by more or fewer voting rights than Class A shares. Class B shares may also have lower repayment priority in the event of a bankruptcy.
Each Class B share has 1/1500th of the economic rights of a Class A share. Each Class B share has 1/10,000th of the voting rights of a Class A share. Each Class A share can be converted to 1,500 Class B shares without triggering tax consequences, but Class B shares cannot be converted into Class A shares.
If you want to invest in Berkshire Hathaway, you can certainly buy some shares of the individual stock, but there is a potentially less risky option: Funds. Funds, such as index funds, exchange-traded funds and mutual funds, are baskets of stocks you can invest in all at once.
CEO Warren Buffett has suggested that investors buy the Class B stock when the A-share premium is more than 1%. He has advised buying the A shares when the two classes are at parity, as they were at the start of 2023.
Additionally, Class B shares may be less liquid than other types of stock, which can make them harder to sell if investors need to cash out their holdings.
In general, investors who hold Class B shares for more than a year will be subject to long-term capital gains tax rates, which are generally lower than short-term rates.
According to the latest long-term forecast, Berkshire Hathaway price will hit $450 by the middle of 2025 and then $500 by the end of 2026. Berkshire Hathaway will rise to $600 within the year of 2028, $700 in 2029, $800 in 2031 and $900 in 2034.
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.
Over the past decade, Berkshire's beta is 0.63, showing it experiences significantly less volatility than the broader market. For these reasons, Berkshire Hathaway is an excellent stock to add to your portfolio today and hold for the long haul.
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%.
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