Is Berkshire Hathaway's A Share Class a Buy?

Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) is one of the most famous companies on Wall Street today. Run 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 doesn't mean every investor can buy it. That's most prominent with regard to the A share class. Here's why most investors won't want to buy Berkshire Hathaway's A shares, even if they can afford to do it.

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 train 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 keep going, but you probably get the point. This company has its fingers in a lot of different pies.

Image source: The Motley Fool.

The easy way to describe Berkshire Hathaway is to call it a conglomerate. But even that doesn't really do justice to the massive portfolio of businesses it owns. Then there's the investments in other public companies, which tallied up to $280 billion at the end of the second quarter of 2024. That's down from $350 billion at the end of 2023, because Warren Buffett has been selling stock in companies like 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 alongside 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 in this way, there's really no wrong or right time to buy it. It is more like a mutual fund that's 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 conducted a stock split on its A shares. But, as you can see in the graph above comparing Berkshire's A shares to the S&P 500 Index, it has grown massively over time. Berkshire Hathaway's A shares trade at around $678,000, give or take a few hundred bucks. The median net worth in the United States is around $193,000. Simple math will tell you that most people just can't 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 the A shares are really an exclusive club that only the very rich and institutional investors can afford to join. Even if you could manage to buy a few shares of the A class, you'd need to think carefully about the diversification of your portfolio. Sure, Berkshire Hathaway is diversified, but do you really want to put all of your eggs into 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, they trade at a much lower price point. Berkshire's B shares currently trade at around $450. That's a figure that the median U.S. citizen could afford far more easily. To be fair, it's not a low stock price, given that there are companies that trade for pennies. But it is manageable if you want to invest alongside Warren Buffett.

Berkshire Hathaway A shares are generally not the better buy

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

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool has a disclosure policy.