The clearest way to figure out Why is Berkshire Hathaway Stock so Expensive? to compare it with other companies.
First of all, many companies do stock splits. That means that one share becomes many shares.
Apple believes that the price of its shares is too high for investors to bear. So, they do a two-for-one stock split. One share is divided into two equal pieces—half the price for double shares.
Berkshire Hathaway on the other hand, never does anything like that. The price continued to rise, and they decided that only the super-rich would be able to obtain an A-class share.
The fact that Berkshire Hathaway’s Class A shares did not go through any stock splits is the key explanation, aside from the company’s long history of huge growth. This is what sets the stock apart from other significant corporations like Microsoft, Apple, and Amazon, which all have lower-priced shares due to their higher share count.
Let’s dive in and know more about the stock and the company.
- Berkshire Hathaway Stock is owned by Warren Buffett, who is the CEO of the company and a Billionaire Investor.
Main reason for costly berkshire Hathaway Stock
Berkshire Hathaway’s Stock Has Never Been Split by Warren Buffett
In 1980, Berkshire Hathaway’s stock was less than $300 per share. Berkshire costs around $7,000 after a decade. The price then increased to $50,000 in the year 2000. So, at present, it costs four times the price in 2000.
Berkshire Hathaway is not the only stock company with a rising total equity value over time, as there are other companies as well. Berkshire Hathaway’s total equity worth isn’t even the highest. It still lags behind behemoths like:
The main difference and problem are that each of these four companies has split its stock.
Classes of the Stock
Berkshire Hathaway created two share classes that trade on the stock exchange. The Class A shares (BRK-A) are currently trading at over $473,000 per share, whereas the Class B shares (BRK-B) are only trading at around $313 per share.
That’s a significant price differential, so one could wonder why Berkshire’s class is so high. A stock is trading at a ridiculously low price.
To be honest, that’s a huge sum of money!
One could easily pay for four years of college tuition fees, a down payment on a home that cost $1 million, or buy a top-notch sports car. For the amount of money, one could acquire a lot more personal shares of great companies like Google or Apple.
A stock split occurs when a firm increases the number of shares it issues to increase the liquidity of its stock.
As an example, let’s say that stock was trading at around $2,000 per share. Everyone who previously possessed one $2,000 share for a total value of $2.000 would now receive two $1,000 shares for a total value of $2,000.
Splits don’t impact a company’s fundamentals or value, but they do make a company’s stock more appealing to retail investors, perhaps increasing liquidity and causing the share price to rise modestly.
One good thing about a Stock Split is that the stock split will double the number of shares which in turn increases the profits of investment.
Berkshire Hathaway’s Class A shares have never been split in the company’s existence. The stock has increased in tandem with the company’s valuation, and it is currently the most expensive stock on the market.
For a variety of reasons, Warren Buffett is opposed to stock splits.
He disapproves of short-term traders who believe they can regularly profit from the stock simply because they can’t. Any number of stock splits would have finally reduced the share price down to a level where most short-term investors could trade it. Buffett loves to have serious and committed long-term partners as class A shareholders and believes in the classic buy-and-hold mentality.
So it’s evident that Warren Buffett and his Berkshire partners aren’t planning to split the class A shares anytime soon.
Class B shares
Retail investors who are unable to afford class A shares but still wish to own a piece of Berkshire Hathaway can purchase class B shares directly at a significantly lower price.
A stock split for Class B shares occurred in 2010, and more stock splits are anticipated to occur in the future. Because they represent the same corporation, both class A and B shares have performed identically.
As a result, aside from some benefits such as additional voting rights or the option for class A owners to change their holdings into an equivalent number of class B shares at any time, there isn’t a significant difference between class A and B shares.
The reason why Berkshire Hathaway did not choose to split its stock is the primary explanation for its high price. As a result, the price of every share has increased in tandem with the holding company’s massive expansion over the years, and it is presently the most ‘expensive’ publicly traded stock.
Warren Buffett and the board of directors are opposed to splitting their stock because it would make it simpler for more and more inexperienced investors to gain control of the company.
This would allow the stock to be subjected to more speculation and short-term trading in the future. Buffett prefers to regard the company’s owners as partners rather than as investors who can change their minds in a matter of hours or days.
- Is there any lower amount to buy stock in Berkshire Hathaway?
- You can buy Class-B stock in Berkshire Hathaway if you want to invest in the company.
- What is the difference between Class-A stock and Class-B stock in Berkshire Hathaway?
- The difference between the two stocks is their price. As of 2021 Dec, Class A stock closed at $454,400 per share, while $301 per share for Class B stock.
- Is it better to buy Berkshire Class A stock or B stock?
- It depends; while Class B shares are mostly preferred by investors who want flexibility or don’t have a lot of money to invest in Berkshire, those who want to change their Berkshire holdings in a more granular fashion will likely choose the considerably lower price point of Class B shares.
- What is the highest stock?
- Berkshire Hathaway has the highest stock price in the world, at $445,000.
- How many assets does Berkshire Hathaway presently have?
- According to the latest information, Berkshire Hathaway has $144 billion.