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

Berkshire Hathaway (BRK.A 2.87%) (BRK.B 2.27%) is one of the most recognizable names in the financial world, primarily due to its association with legendary investor Warren Buffett. For investors wanting to align their portfolios with Buffett's strategies, there are two classes of shares available: Class A and Class B.

For most investors, the more accessible option will typically be the B shares. However, it’s essential to weigh the choices surrounding buying, selling, holding, or converting the A shares.

Buying Berkshire Hathaway A Shares

Purchasing Class A shares of Berkshire Hathaway is only feasible if you have substantial capital at hand. The price tag for a single A share is over $748,000, making it one of the most expensive stocks in the market.

This exorbitant cost can be a significant barrier, as buying just ten shares requires almost $8 million. Consequently, the daily trading volume for A shares is relatively low, averaging around 1,500 shares. Despite the financial strain, owning A shares carries a certain prestige, especially if you have held them for years and enjoyed considerable capital gains. While investing in A shares is a valid strategy to partner with Buffett, few investors can afford such an investment.

Holding Berkshire Hathaway A Shares

If you currently own Class A shares, there’s little reason to sell them. Berkshire Hathaway, under Buffett’s guidance, has a stellar long-term track record and employs a robust investment strategy. Additionally, the company holds a substantial cash reserve that could be advantageous during market downturns when investment opportunities are amplified.

If you are satisfied with the management and direction of Berkshire Hathaway, holding onto your shares remains a sound decision.

Selling Berkshire Hathaway A Shares

Sometimes, selling stocks becomes necessary if you need cash. In the case of Berkshire Hathaway A shares, selling a single share can yield a significant sum. However, you may also choose to sell if you believe that the current stock price is too high or if you disapprove of the growing cash reserve built up by Buffett, which now sits around $334 billion in cash and short-term investments.

Concerns regarding company leadership may also be a factor. With Warren Buffett approaching retirement from his day-to-day role and the passing of his long-time partner, Charlie Munger, some investors may worry about the future direction of the company. Although the next group of leaders will likely be well-trained in Buffett’s investment philosophy, there’s no certainty about how the company will perform under new management.

Converting Berkshire Hathaway A Shares

A notable feature of Berkshire Hathaway’s share structure is that owners of A shares have the privilege of converting them into 1,500 B shares. This conversion aspect has two important implications. First, it promotes a close price relationship between the two classes of shares.

Second, if you need to sell an A share, it can be more beneficial to convert it into B shares first. This allows you to sell just the amount you need to cover your cash requirements while still maintaining exposure to Berkshire Hathaway. If selling your entire position is the goal, converting to B shares may simplify the process, as B shares tend to be more liquid, typically trading around 3.9 million shares daily.

Timing Your Purchase of Berkshire Hathaway

Berkshire Hathaway operates uniquely, resembling a mutual fund that capitalizes on Buffett’s and his team's investment skills. Thus, it’s challenging to specify an inappropriate time to engage with a proficient investment manager. Nonetheless, given that the market—and Berkshire Hathaway—are near all-time highs, some investors may feel compelled to sell.

The high value of A shares and the ability to convert them into B shares introduce a layer of decision-making that isn’t present with most other stocks. Those holding A shares should consider this conversion option in their strategies, which offers added flexibility for investment management.

Ultimately, whether you buy, hold, sell, or convert may depend on your personal financial situation and investment objectives.

Berkshire, Buffett, Investment