The choice between investing in Berkshire Hathaway Class A (BRK.A) or Class B (BRK.B) shares primarily depends on your investment capital and objectives, as Class B shares offer a significantly more accessible entry point for most individual investors.
Understanding Berkshire Hathaway's Share Classes
Berkshire Hathaway, led by Warren Buffett, offers two distinct classes of common stock: Class A (BRK.A) and Class B (BRK.B). While both represent ownership in the same underlying company, they differ in price, voting rights, and accessibility.
The Class B shares, first issued in 1996, were introduced to make ownership in Berkshire Hathaway more attainable for smaller investors. They are significantly more modestly priced compared to the Class A shares and, correspondingly, represent a modest share of the equity value in the company. Although there can be minor differences in their day-to-day market performance, the fundamental distinction lies in their affordability and the privileges each class confers.
Key Distinctions: BRK.A vs. BRK.B
Here's a breakdown of the primary differences between Berkshire Hathaway's Class A and Class B shares:
| Feature | Berkshire Hathaway Class A (BRK.A) | Berkshire Hathaway Class B (BRK.B) |
|---|---|---|
| Share Price | Extremely high (often in the hundreds of thousands of dollars per share). | Significantly lower, making it affordable for most individual investors. |
| Voting Rights | Very high; each Class A share carries substantial voting power. | Lower; each Class B share carries 1/10,000th of the voting rights of a Class A share. |
| Accessibility | Primarily accessible to institutional investors or ultra-high-net-worth individuals. | Designed for small investors and the general public due to its lower price. |
| Equity Value | Represents a very large portion of the company's equity value per share. | Represents a proportionately modest share of the company's equity value per share. |
| Convertibility | Cannot be converted into Class B shares directly by the investor (though Class A shares can be split into 1,500 Class B shares by the company). | Can be converted into Class A shares (though rarely practical due to the price difference). |
| Dividends | Neither Class A nor Class B shares have ever paid cash dividends. | Neither Class A nor Class B shares have ever paid cash dividends. |
Who Should Invest in Which?
Your decision should align with your investment budget and goals:
- Consider BRK.B if you are a typical individual investor.
- The overwhelming majority of individual investors will find BRK.B to be the only practical option due to the prohibitively high price of BRK.A shares.
- Investing in BRK.B allows you to gain exposure to Berkshire Hathaway's diverse portfolio of businesses and its management philosophy, albeit with less voting power.
- BRK.B shares generally offer higher liquidity due to their lower price and broader investor base.
- Consider BRK.A if you are an institutional investor or a high-net-worth individual focused on voting control.
- BRK.A shares are typically held by long-term institutional investors or individuals who seek the maximum possible voting influence within the company.
- The extreme price of Class A shares limits their accessibility, often making them a symbol of significant capital and long-term commitment.
Ultimately, both share classes track the same underlying business performance. For nearly all investors, the Class B shares provide the same economic exposure to Berkshire Hathaway's success at a much more attainable price point.
