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Warren Buffett’s worst career investment was Berkshire Hathaway. At least, that’s what he claims, but if you're trying to learn how to buy Berkshire Hathaway stock, you might be skeptical of this.
Known as the “Oracle of Omaha,” Buffett founded Berkshire Hathaway (BRK.A) in 1965. The original Berkshire Hathaway, a textile manufacturer, can trace its roots back to 1839. By 1965, Buffett bought enough shares to take over the company and its management. The company has since divested from the textiles business and invests in and manages companies across various industries. Famously, it’s saved Burlington Northern Santa Fe Railroad, USG, GE, Bank of America, Harley-Davidson and the Omaha World-Herald.
Berkshire Hathaway at a Glance
In the 1970s, the company expanded its holdings into insurance with the purchase of Wesco Financial Corporation, as well as shares of GEICO. The company further expanded its holdings into popular companies such as ABC, Coca-Cola, and Exxon Mobil. The company also offered class B shares in 1996 as a way to lower the price so average investors could purchase shares in the company.
Berkshire Hathaway has gone through some interesting changes and events over the years:
- Purchase of Coca-Cola stock in 1987: by 2017, the 10% stake in the company gained 1300%.
- In 1992, the price of one share of Berkshire Hathaway topped $10,000, with a company market value of $14.9 billion.
- Over the years the stock achieved an average compounded gain of 20%.
History of Berkshire Hathaway
If you had invested $10,000 in 1964, you would have had $240 million by the end of 2017, a 2,404,748% gain. In 1996, the Class B shares provided investors 1/30th ownership of one share of Berkshire stock, which were split 50 to 1 in 2010, making the ownership 1/1500th of a Class A share.
Why Purchase Berkshire Hathaway?
Pros of purchasing Berkshire Hathaway stock:
- The company has one of the best track records across multiple decades for shareholder returns.
- Management maintains a consistent, clear, and transparent investing philosophy.
- The firm invests for value at all times, serving as both a role model and a safe place for investors to spend.
- Holdings are in companies that are fairly simple to understand and analyze.
- Berkshire invests for the longterm, often retaining management of firms it overtakes, improving the business at a considerable profit rather than breaking up the company and impacting local economies.
Cons of purchasing Berkshire Hathaway stock:
- Although Buffett has named successors, he’s near the end of his life, and many consider him inseparable from the company.
- The company often doesn’t invest in technologies it doesn’t understand or are new, which could hinder it during major technological changes.
- Over the past several years the companies core holdings haven’t performed very well compared to the rest of the market.
How to Purchase BRK
Berkshire Hathaway’s stock is available in Class A and Class B shares. Both are openly traded; the differences are in the price as well as the total amount of corporate ownership. Here’s how to buy either:
- Determine the appropriate number of shares.
Berkshire Hathaway’s stock is priced very high for both Class A and Class B shares. Class A shares are $315,000, so it’s important to decide how much you wish to invest and then see if Class A or Class B shares are appropriate for your needs. Remember to round down when determining the number of shares you will be able to purchase.
- Decide which broker to use.
Most major brokers offer the ability to purchase Berkshire shares through online trading, in person at a satellite office or over the phone. Brokers should meet your needs based on service, fees, and reporting.
- Buy shares of BRK.
Once you've chosen a broker, determined shares and class, you will either enter an order online, over the phone or in person with your broker.
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Future Outlook for Berkshire Hathaway Stock
Berkshire Hathaway is known as a stalwart in the investing world. The company’s track record and Warren Buffett’s name are synonymous with success in the industry. It’s not a stock or company that will make you rich overnight. However, as Buffett has proven time and again, research, due diligence and patience often beat out any short term trends.
The company’s future lies in its succession plan. Buffett is 91 years old at the time of this article’s writing. At some point he will no longer be with the company, or at least leading it. His partner, Charlie Munger, is 97. The company hasn’t clearly stated who will be the successor, which leaves many investors uneasy about the company’s success after Buffett.
In January 2022, Berkshire Hathaway inched closer to becoming the next trillion-dollar company, receiving a valuation over $700 billion. Additionally, the firm made around $120 billion on Apple’s rise to a $3 trillion-dollar company, adding massive amounts of cash to its stockpile. At publication time in early January 2022, Berkshire was sitting on nearly $150 billion in cash, but bargains were difficult to find as stock indexes soared and corporate valuations skyrocketed.
Final Thoughts
As with any other investment, even though the company itself may be well diversified, it’s nonetheless important to not treat it as an index fund, and evaluate the holding as an individual company.