Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) stock has proven to be one of the best-performing investments of all time. Since 1980, shares have increased more than 2,000 times in value. A $500 investment would now be worth a cool $1 million.
Want to invest in Berkshire? There are two options: A shares or B shares. The ticker symbol for the A shares is BRK.A, while the ticker symbol for the B shares is BRK.B. Which Berkshire stock should you buy?
Most people should buy this Berkshire stock
Warren Buffett decided to create a second class of Berkshire stock in 1996. At the time, the price of Berkshire's original shares had exceeded $30,000. That's a lot more than most people were prepared to spend on a single share of stock.
To make Berkshire more accessible, several independent funds were preparing vehicles that would allow investors to gain exposure to Berkshire without needing to pony up $30,000. In his 1996 shareholder letter, Buffett stressed that these funds "would have marketed themselves as Berkshire look-alikes." He worried they would use Berkshire's reputation to "entice naive small investors and would have charged these innocents high fees and commissions."
In response, Berkshire B shares were created, with a starting price of just over $1,000. A-share owners had the right to convert to B shares on a 30-for-1 basis. However, B shares carried slightly weaker voting rights, with each share having 1/200th of the voting rights of an A share. But B shares still conveyed ownership in Berkshire, and at a lower price. Now, smaller investors could buy into Berkshire without needing to invest in a separately managed fund that charged unnecessary fees.
Note that the A shares have never experienced a stock split, and now have a price above $600,000. The B shares, meanwhile, have been split to help fund acquisitions, and now have a price of around $400. Many long-term investors enjoy the novelty and commitment required to own Berkshire's A shares, but for the vast majority of investors, the B shares provide the same exposure in a more affordable, far more flexible way.
Should you invest $1,000 in Berkshire Hathaway right now?
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Ryan Vanzo 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.
