For some reason, when we talk about the largest companies in the world, Berkshire Hathaway never seems to get recognition. We talk about Apple and Microsoft and Amazon, but Berkshire never gets the praise that big tech stocks do. As of 2023, it is the world’s sixth-largest company by market capitalization at $680 billion. If you have ever looked up Berkshire’s stock you might have had to do a double-take. Why is Berkshire Hathaway’s stock so expensive?
Berkshire Hathaway Class A Shares are the most expensive in the world. As of March 2023, a single share will cost you upwards of $457,820! In this age of stock splits and fractional shares, it is an unconscionable price. There are several reasons why Berkshire’s stock is so expensive and we will cover them in this article.
Is there any point in owning a stock with a share price that could buy you a house in most American cities? Well, to start with, Berkshire Hathaway is owned and operated by Warren Buffett. Investing in anything that the Oracle of Omaha is involved in is usually a winning strategy. But Buffett’s involvement is likely a reason why the stock’s price is as high as it is. Let’s take a closer look at one of the market’s most fascinating stocks: Berkshire Hathaway Class A.
Why is Berkshire Hathaway’s Stock so Expensive?
First of all, the stock is expensive because the company is well-operated. Berkshire Hathaway is a holding company that invests in other publicly-traded companies. Investing in Berkshire Hathaway is a little like buying shares of an ETF that Buffett manages. That alone is reason enough to consider investing in Berkshire Hathaway.
Related Financial Geek Article: Is Warren Buffett’s Berkshire Hathaway (BRK) a Hedge Fund?
Another reason why Berkshire Hathaway’s Class A Shares are so expensive is that the stock has never been split. This is one rule that will likely stay in place as long as Buffett is in charge of the company. He has been asked about a potential stock split for years now but Buffett has refused to budge on the issue.
Buffett has even acknowledged how awkward or disadvantageous it is to own such an expensive stock. Still, he and Charlie Munger have refused to waiver on the topic. If they didn’t split the stock after it hit $500,000 per share, there is a good chance they never will! But to appease smaller retail investors, Buffett and Berkshire Hathaway introduced the Class B share in 1996.
What is the Difference Between Berkshire Hathaway A and B Shares?
In 1996, Berkshire Hathaway introduced its much more affordable Class B shares. In March 2023, these shares are priced at a more reasonable $300 per share. There are some disadvantages to owning Class B stock though. The share of the company is much lower than with the Class A stock. There are only 619,940 BRK.A shares on the market compared to more than 1.3 billion Class B shares.
Owning one share of Class B and one share of Class A is not the same thing at all. Appropriately, Class A shareholders also have much more voting power than Class B shareholders. Unlike the Class A stock, the Class B stock has split its stock once in 2010 at a factor of 50 for 1.
Other than that there isn’t much else different between the two stocks. They are both providing you with exposure to one of the best-managed funds in history. Is there one stock that is better? Not really. Neither stock pays a dividend even though Buffett makes much of his fortune from dividend-paying stocks.
Who Owns the Most Berkshire Hathaway A Stock?
The obvious answer here is Warren Buffett himself! Buffett owns more than 229,000 shares of Class A stock. He also owns 276 shares of Berkshire’s Class B stock as well. This massive ownership of Berkshire Class A gives him more than 37% of the outstanding shares and more than 30% of the overall voting power.
But Buffett isn’t the only one who owns Berkshire’s Class A stock. Not surprisingly, most of the names on this list are the elite of the American financial sector. Names like Fidelity Management, First Manhattan, and the Vanguard Group are at the top of the list. After all, who else would have the money to own some of these lucrative shares? Companies like Vanguard will hold BRK stock in their various index funds for people to invest in.
Are Berkshire Hathaway Shares a Good Buy?
Anytime you can own a fund that is managed by Warren Buffett it is a good investment. There is a reason why he is widely seen as the greatest investor in history. As for the stock, Berkshire Hathaway A stock outperformed the benchmark S&P 500 index last year. This is impressive since nearly all of the stocks Berkshire holds are components of the S&P 500.
Some things to consider before investing in Berkshire Hathaway’s stock. I already mentioned that neither stock pays a dividend. This is irregular for a blue-chip stock of Berkshire Hathaway’s stature. It is even more confusing when you consider that Buffett holds mostly high dividend-paying stocks.
You can buy fractional shares of Berkshire Hathaway Class A shares. If you are buying in such small increments, you are probably just better off buying the Class B shares. Such a small percentage of the Class A stock won’t make much of a difference in the grand scheme of things!
You might be thinking buying fractional shares is a good way to accumulate BRK.A shares. Have you ever wondered if fractional shares pay dividends? Click the link to find out!
The Bottom Line: Why is Berkshire Hathaway Stock so Expensive?
The single biggest reason why Berkshire Hathaway stock is so expensive is that Buffett refuses to split the stock. He has openly said he only wants to attract shareholders who are long-term investment oriented. Buffett wants to avoid volatility which could have a negative impact on the intrinsic value for shareholders. Say what you will, but you have to respect Buffett’s reasoning here! Ultimately he has the shareholder’s best interest in mind.
I hope that answered your question about Berkshire Hathaway stock!