Berkshire Hathaway A: Buy, Sell, Hold, or Convert?

Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) is one of the most well known companies on Wall Street, largely because the company is the investment vehicle of investing icon Warren Buffett. If you want to invest alongside Buffett, however, you can buy one of two share classes of the company.

The easy answer for most investors will be to buy the B shares. But what about the buy, sell, hold, or convert decisions with the A shares?

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Buy Berkshire Hathaway A shares

If you have a massive amount of money, you might consider buying Berkshire Hathaway A shares. Massive might even be an understatement, since each A share costs over $748,000.

That's not a typo! To buy just 10 shares, you would need nearly $8 million dollars. No wonder the average daily volume of A shares that get traded is just about 1,500 shares. One share of the A shares is likely to be out of reach for most investors, let alone buying multiple shares.

That said, if you have the money, there's a certain bragging right to be able to say you own the A shares. There's an even bigger bragging right if you have owned the A shares for years, since it means you recognized Warren Buffett's abilities earlier than most and likely have massive capital gains. Still, while buying Berkshire Hathaway A shares is a perfectly fine way to invest alongside Buffett, only a small number of investors will likely be able to come up with enough cash to do so.

Hold Berkshire Hathaway A shares

Simply put, if you own Berkshire Hathaway A shares, there's no particular reason to sell them. Buffett and his team have an incredible long-term track record and a well-honed investment approach. And the company has a huge cash hoard that it can put to work during the next market downturn, when attractive investment opportunities are likely to be more plentiful than they are today.

If you've been happy with the way Berkshire Hathaway has been managed, there's no reason to sell.

BRK.A data by YCharts.

Sell Berkshire Hathaway A shares

If you need cash, well, sometimes you have no choice but to sell some stocks. In the case of Berkshire Hathaway's A shares, selling just one share will generate a huge amount of money for you.

You could also believe that Berkshire Hathaway deserves to be sold. The list of reasons could reasonably include a lofty price, given the stock is trading near all-time highs. You might not like the cash hoard that Buffett has been building up, either, given that the company has been selling stock investments and now has around $334 billion in cash and short-term investments on its balance sheet. (That's not a typo, either.)

The logic could also reasonably include concerns around leadership, given that Warren Buffett is likely close to the point where he will no longer be running the day-to-day operations. Charlie Munger, Buffett's partner for many years, died not too long ago.

While the next set of leaders are likely to be well trained and steeped in Buffett's unique approach, there's no telling what will actually happen when he leaves the helm. That said, there's another option when it comes to selling Berkshire Hathaway A shares.

Convert Berkshire Hathaway A shares

The unique A/B structure of Berkshire Hathaway comes with a valuable twist. Owners of the A shares can convert them into 1,500 of the B shares.

There are two big takeaways here. First, because of the conversion feature, the two share classes are likely to trade in lockstep.

Second, if you need to sell an A share for some reason, it might make more sense to convert it to 1,500 B shares and then only sell the number of shares to raise the cash you need (or reduce your Berkshire Hathaway exposure to a more comfortable level). This way, you can maintain as much exposure to Berkshire Hathaway as possible while still generating some cash.

Even if you want to sell your entire position, it might still be easier to do that by converting first, since the B shares are more liquid. (The average daily volume is 3.9 million shares.)

There's no wrong time to buy Berkshire Hathaway

Berkshire Hathaway is an odd company that operates more like a mutual fund than anything else. You're really buying the investment skills of Buffett and his team.

It's hard to suggest that there's a wrong time to hire a good investment manager. That said, the market is near all-time highs and so is Berkshire Hathaway's stock price, so there are legitimate reasons some investors might want to sell.

The high price tag for the A shares and the ability to convert them into B shares changes the equation for both buying and selling, compared to other companies. Simply put, if you own the A shares, you have to add a fourth branch to the buy, sell, and hold decision tree, since you can also convert to the B shares. That ability is a potentially valuable additional tool at your disposal that you should understand and use if it works for you.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.