Is Berkshire Hathaway’s Class A stock a buy?

Berkshire Hathaway (BRK.A 0.80%) (BRK.B 0.46%) is one of the most well-known companies on Wall Street today. Headed by investment icon Warren Buffett, it is a very unique entity. There are some good reasons why investors might want to buy it, but that’s not every investor maybe buy it This is most important with Class A shares. This is why most investors will not want to buy Berkshire Hathaway’s A shares, even if they can afford to.

What does Berkshire Hathaway do?

Berkshire Hathaway is an insurance company. Berkshire Hathaway is a utility. Berkshire Hathaway is a midstream pipeline company. Berkshire Hathaway is a railroad company. Berkshire Hathaway is a chemical company. Berkshire Hathaway is a manufacturing company. Berkshire Hathaway is a retailer. Berkshire Hathaway is a housing company… The list could go on, but you probably get the idea. This company has its fingers in a lot of different pies.

Image source: The Motley Fool.

The simple way to describe Berkshire Hathaway is to call it a conglomerate. But even that doesn’t do justice to the massive business portfolio he owns. Then there’s investment in other public companies, which stood at $280 billion at the end of the second quarter of 2024. That’s down from $350 billion at the end of 2023, as Warren Buffett sold shares in companies such as Bank of America and Apple. The key point here, however, is that Buffett’s Berkshire Hathaway is not your typical company in any way, shape or form.

In fact, it was created based on Warren Buffett’s unique way of investing. In many ways, that’s why investors buy Berkshire Hathaway, to invest with a man who has been called the “Oracle of Omaha” because of his successful investment history.

BRK.A data by YCharts.

If you look at Berkshire Hathaway this way, there really is no wrong or right time to buy it. It is more like a mutual fund that is run by a star manager. Sure, there are better and worse times to buy, but is there really a wrong time to hire a manager with a long track record of beating the market? And you still probably won’t buy the A shares.

A unique company and a unique stock

Berkshire Hathaway has never done a stock split on its A shares. But as you can see in the chart above, comparing Berkshire’s A shares to its S&P 500 Indexhas grown massively over time. Berkshire Hathaway’s A shares trade for about $678,000, give or take a few hundred dollars. The average net worth in the United States is approximately $193,000. Simple math will tell you that most people simply cannot afford to buy Berkshire Hathaway’s A shares — not even a single share!

That has nothing to do with the desirability of Berkshire Hathaway as an investment. It’s just that A shares are really an exclusive club that only the very wealthy and institutional investors can afford to join. Even if you could manage to buy a few Class A shares, you should think carefully about diversifying your portfolio. Sure, Berkshire Hathaway is diversified, but do you really want to put all your eggs in Buffett’s hands and hope he doesn’t make a mistake?

That’s why Berkshire Hathaway ended up creating B shares. Each A share can be converted into 1,500 Class B shares. Thus, it trades at a much lower price. Berkshire’s B shares are currently trading at around $450. This is a figure that the average American citizen could afford much more easily. To be fair, it’s not a small share price when there are companies that trade in pennies. But it’s manageable if you want to invest with Warren Buffett.

Berkshire Hathaway A shares are generally not the best buy

Given the huge price tag involved in buying Berkshire Hathaway A shares, most investors won’t be able to buy them. That makes B shares the default choice. But even if you can afford A shares (even if it’s just a few shares), you probably won’t want to buy them because it will involve committing huge amounts of money to just one company. Sure, it’s a diversified company that could easily be seen as something similar to a mutual fund. But 10 shares would be worth nearly $7 million. Such a large commitment to a single company simply won’t be a prudent move for most investors.