Understanding Berkshire Hathaway's Class A and Class B Shares
Berkshire Hathaway, led by the renowned investor Warren Buffett, offers investors two distinct classes of common stock: Class A (BRK.A) and Class B (BRK.B). While both represent ownership in the same underlying company, they possess significant differences in price, voting rights, and accessibility, making it crucial for potential investors to understand these distinctions before making an investment decision [1] [3].
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The fundamental difference between Berkshire Hathaway's Class A and Class B shares lies in their price, voting rights, and convertibility. Class A shares are significantly more expensive and carry substantially greater voting power, while Class B shares are more affordable and have reduced voting rights. Class A shares can be converted into Class B shares, but the reverse is not possible [1] [2] [3] [5].
Historical Context and Purpose of Class B Shares
For many years, Berkshire Hathaway operated with only its Class A shares, which, due to the company's immense success and Warren Buffett's philosophy of attracting long-term investors, reached an exceptionally high price per share [3] [4]. This high price, often in the hundreds of thousands of dollars, served as a deliberate barrier to discourage short-term speculation and attract investors aligned with Buffett's buy-and-hold strategy [1] [3].
However, as the Class A share price continued to climb, it became inaccessible to most individual investors. In 1996, to address this growing demand and prevent the proliferation of "Berkshire look-alike" unit trusts that would charge high fees to small investors, Warren Buffett and the board introduced the Class B shares [1] [4]. These Class B shares were initially priced at 1/30th of a Class A share and offered a more affordable entry point into the company [1]. A significant event in their history was the 50-to-1 stock split of the Class B shares in 2010, further increasing their accessibility and establishing the current ratio where one Class A share is convertible into 1,500 Class B shares [1] [3].
Key Differences Between Class A and Class B Shares
Price and Accessibility
The most apparent difference is the price. As of May 2, 2025, Class A shares reached over $812,000 per share, while Class B shares were over $542.00 [1]. This vast price disparity makes Class B shares the practical and often only option for most individual investors seeking to own a piece of Berkshire Hathaway [3] [5]. The lower price of Class B shares also offers greater flexibility for investors to build or adjust their positions without dealing with the substantial capital required for a single Class A share [1] [5].
Voting Rights
Voting rights represent another critical distinction. A single Class A share carries significantly more voting power than a Class B share. Specifically, each Class B share has only 1/10,000th of the voting rights of a Class A share [1] [3]. While this difference is largely symbolic for most individual investors holding a few shares, it is a crucial factor for large shareholders or institutional investors aiming to influence the company's direction [3] [6]. Warren Buffett's intention with this structure was to maintain control within the company while still allowing broader public investment [6].
Convertibility
Convertibility is a one-way street for Berkshire Hathaway shares. Class A shares can be converted into 1,500 Class B shares at any time at the holder's option [1] [2] [3]. This feature can be beneficial for Class A shareholders who need to sell a portion of their holdings or for estate planning purposes [3]. However, Class B shares cannot be converted into Class A shares [1] [2] [3]. This asymmetry in conversion rights helps maintain the price ratio between the two classes through arbitrage; if the Class B price deviates significantly from 1/1,500th of the Class A price, arbitrageurs can buy Class A, convert to Class B, and sell, bringing the prices back into alignment [2] [3].
Dividends and Economic Rights
Despite the differences in price and voting rights, both Class A and Class B shares represent ownership in the same underlying company and offer the same economic exposure to Berkshire Hathaway's diverse portfolio of businesses and investments [3] [5]. Neither Class A nor Class B shares pay a dividend, as Warren Buffett and the board have historically chosen to reinvest all earnings back into the company to generate higher returns for shareholders over time [3] [7].
Why Choose One Over the Other?
For the vast majority of individual investors, Class B shares (BRK.B) are the logical and practical choice [3] [4] [5]. They provide the same economic benefits and long-term growth potential as Class A shares but at a significantly more accessible price point [1] [3]. The lower price also offers greater flexibility for managing an investment, allowing investors to buy or sell smaller portions of their holdings as needed [1] [5].
Class A shares (BRK.A) are typically considered by investors with a substantial amount of capital who either desire the enhanced voting power or are deeply aligned with Warren Buffett's philosophy of holding for the very long term without needing to liquidate small portions of their investment [3] [5]. These shares are often held by institutional investors or high-net-worth individuals [3].
Warren Buffett has famously stated his refusal to split Class A shares, believing that their high price attracts like-minded, long-term investors and discourages short-term speculation [1] [4]. The creation of Class B shares was a direct response to make Berkshire Hathaway accessible to a broader investor base while preserving the unique characteristics of the Class A shares [1] [4].
Conclusion
In summary, while Berkshire Hathaway's Class A and Class B shares both represent ownership in one of the world's most successful companies, they are not identical. The key distinctions lie in their price, voting rights, and convertibility. Class B shares offer a more affordable and flexible entry point for most investors, providing the same economic benefits as Class A shares without the prohibitive price tag or the significant voting power that is largely irrelevant to individual retail investors [1] [3] [5]. Understanding these differences is paramount for any investor considering adding Berkshire Hathaway to their portfolio.
Authoritative Sources
- Berkshire Hathaway Class A vs. Class B Shares. [Investopedia]↩
- Comparative Rights and Relative Prices of Berkshire Class A and Class B Stock. [brkshr.com]↩
- Berkshire Hathaway Class A vs. Class B: Which Stock Should You Buy?. [Investing.com]↩
- Is BRK.A or BRK.B a Better Buy?. [Yahoo Finance]↩
- Better Buy: Berkshire Hathaway A or BRK.B?. [The Motley Fool]↩
- Class A Stock vs. Class B Stock: Differences and Examples. [SmartAsset]↩
- Berkshire Class A or B. [gherget.com]↩
Answer Provided by iAsk.ai – Ask AI.
Warren Buffett, often hailed as one of the most successful investors of all time, has built his legendary career on a foundation of timeless investment principles and a disciplined approach to capital allocation. His philosophy, deeply rooted in Benjamin Graham's value investing tenets, emphasizes a long-term perspective, a focus on intrinsic value, and a keen understanding of business fundamentals rather than market fluctuations [1] [2] [3].
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Buffett's investment strategy is characterized by several core principles. He views stocks as ownership stakes in real businesses, not merely as speculative instruments to be traded based on short-term trends [4] [5]. This "owner mindset" leads him to focus on a company's intrinsic value and performance, rather than its daily stock price [4]. He famously stated, "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes" [6]. This long-term holding period allows businesses to compound value over time [4].
A crucial aspect of Buffett's approach is his insistence on investing within his "circle of competence" [4] [6]. He only invests in businesses he thoroughly understands, avoiding industries or companies whose mechanics he cannot fully grasp [4] [6]. This explains his historical avoidance of certain tech stocks, as he admitted not understanding the internet industry [6]. This discipline prevents him from making speculative bets outside his area of expertise [4].
Buffett also champions the concept of an "economic moat" [3] [4] [6]. He seeks companies with sustainable competitive advantages that protect them from rivals, much like a moat protects a castle [4] [6]. These moats can manifest as strong brands, network effects, cost advantages, patented technology, or high switching costs [4]. A wide and enduring moat ensures a business's long-term profitability and resilience [4].
Another cornerstone of his philosophy is the "margin of safety," a concept learned from his mentor Benjamin Graham [3] [4]. This means buying a company at a price significantly below its intrinsic value, providing a cushion against potential errors in analysis or unforeseen business challenges [4] [6]. Buffett believes that even a great business can be a poor investment if the price paid is too high [4]. He looks for "quality merchandise when it is marked down" [4].
Buffett places significant emphasis on the quality and integrity of management [4] [5]. He looks for leaders who are "able and trustworthy" and who think and act like owners, treating the business and shareholders' money with care [4]. His decision to reduce Berkshire Hathaway's stake in Wells Fargo after its scandal, despite his long-standing admiration for the bank, underscores his commitment to ethical leadership [4]. Conversely, he praises management teams like Apple's Tim Cook for their savvy capital allocation, such as share buybacks that benefit shareholders [4].
Patience and inactivity are also key virtues in Buffett's investment playbook [4] [5]. He views the stock market as a "no-called-strike game," meaning investors are not penalized for waiting for the perfect opportunity [4]. He and Charlie Munger are content to hold significant cash reserves when they cannot find investments that meet their stringent criteria, demonstrating a disciplined refusal to force bad bets out of impatience [4]. As of Q1 2025, Berkshire Hathaway held a record $347 billion in cash, illustrating this principle [4].
Buffett's contrarian approach is encapsulated in his famous adage: "Be fearful when others are greedy, and be greedy when others are fearful" [3] [4]. He sees market volatility not as a threat, but as an opportunity to acquire undervalued assets when others are panicking [4]. This emotional fortitude allows him to "zig when the crowd zags" and profit from market downturns [4].
Furthermore, Buffett is famously averse to excessive debt and leverage, both for companies and individual investors [4] [6]. He prioritizes a "Gibraltar-like" balance sheet with ample liquidity, ensuring Berkshire Hathaway can weather economic storms and capitalize on opportunities when others are distressed [4]. His conservative stance on debt is rooted in the belief that one should "never risk what you have and need for what you don’t have and don’t need" [4].
Finally, Buffett maintains an unwavering long-term optimism, particularly regarding the American economy [4] [5]. Despite numerous crises throughout history, he believes in the enduring power of human ingenuity, productivity, and the market's ability to create wealth over time [4]. This conviction underpins his willingness to invest even in challenging times, focusing on the long-term upward trend rather than short-term fluctuations [4].
Buffett's methodology for evaluating companies includes a detailed analysis of financial metrics such as Return on Equity (ROE), Debt-to-Equity (D/E) ratio, and profit margins [6]. He looks for consistent performance over five to ten years, preferring companies with low debt and steadily increasing profit margins [6]. He also considers whether a company is public (favoring those with a long public history for financial transparency) and its reliance on commodities, preferring businesses with unique "protective moats" that differentiate them from competitors [6]. The ultimate step is determining if the company is "cheap" relative to its intrinsic value, a skill at which Buffett is exceptionally adept [6].
His investment philosophy is not just about financial gains; it also emphasizes continuous learning and self-improvement [6]. Buffett's annual shareholder letters are considered a masterclass in business and investing, offering transparent and rational insights [4] [5]. His principles, while seemingly simple, require immense discipline, patience, and a deep understanding of business to execute successfully [4] [5].
Authoritative Sources
- GW Law Faculty Publications & Other Works. [GW Law Faculty Publications & Other Works]↩
- What I Learned from Warren Buffett. [hbr.org]↩
- Timeless lessons from Warren Buffett. [mesirow.com]↩
- 10 Timeless Investing Lessons from Warren Buffett (That Still Work Today). [linkedin.com]↩
- Investment Lessons from Warren Buffett in 2025. [duncangrp.com]↩
- Warren Buffett's Investment Strategy. [investopedia.com]↩
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