Investing in Berkshire Hathaway

Warren Buffett’s Berkshire Hathaway is one of the largest companies in the world and has a history of rewarding shareholders over the long-term. In this article, we will take a look at the company, examine its history, take a look inside the Berkshire Hathaway portfolio, demonstrate how to buy Berkshire Hathaway stock and much more!

What Is Berkshire Hathaway?

Berkshire Hathaway is a US multinational holding company. What was founded in 1839 as a textile manufacturer has since been transformed into a major conglomerate which is one of the largest companies in the world by market capitalisation.

To talk of Berkshire Hathaway, one must talk of the man largely responsible for this transformation, Warren Buffett. Buffett took control of the company in 1965 and, despite the subsequent success, has since referred to the investment as a “monumentally stupid decision”.

Buffett’s “Monumentally Stupid Decision”

Buffett began buying shares in Berkshire in 1962 which, at the time, was a struggling textiles business. It had been closing mills and, every time it did so, it would use some of the sales proceeds to buy back its own shares. Buffett sought to capitalise on this pattern by buying shares to eventually sell back at a profit.

So the story goes, in 1964, Buffett verbally agreed with Berkshire’s then CEO to sell his considerable stake in the company back for $11.50 per share. However, when he received the offer in writing, it was for $11.375 per share, an eighth of a dollar less than previously agreed.

Angered by the lower offer, Buffett began buying more of the company’s stock, taking control of Berkshire Hathaway and eventually sacking the CEO who had attempted to undercut him. Thus, Warren Buffett was lumbered with a failing, unprofitable business which operated in an industry he knew little about.

The Transformation

Whilst Buffett kept the textiles assets running, he began allocating capital to other industries, acquiring businesses which became subsidiaries of Berkshire Hathaway.

One of the first of these acquisitions was National Indemnity, which saw Berkshire pivot into the insurance industry. This pivot allowed Buffett to begin transforming Berkshire into the success story we know today.

In exchange for their services, insurance companies receive premiums from their policy holders which are held until such a time as a claim is made. This results in insurance companies holding a lot of cash, which is known as the “float”. Whilst this money must be used to settle future claims, in the interim, it can be used by insurers to invest.

Buffett exploited this system, using the float to invest in opportunities which aligned with his value investing approach. Along the way, Buffett and Berkshire have rewarded long-term shareholders enormously. Between 1965 and 2023, Berkshire Hathaway shares have produced a compounded annual gain of 19.8%, almost double the S&P 500’s 10.2% over the same period.

Berkshire Hathaway Portfolio 2024

Berkshire Hathaway shuttered its final textile operations in 1985. Today, it operates dozens of subsidiaries and holds stakes in around 50 other public companies. The table below shows Berkshire Hathaway’s top 10 stock holdings at the time of writing.

Source: Berkshire Hathaway 13F Filing – 30 June 2024. 

Is Berkshire Hathaway a Buy?

Warren Buffett has overseen a great success story at Berkshire Hathaway, with long-term shareholders being rewarded enormously for their patience. But can the company continue this performance going forward? Is Berkshire Hathaway a buy?

Answering this question is perhaps not as straightforward as answering the same question posed of a different company. When investing in Berkshire Hathaway, investors are gaining exposure to a large number of different companies which operate across a range of different industries.

The company sits on a foundation of wholly owned subsidiaries, including well-known names such as GEICO, Fruit of the Loom, Duracell and Dairy Queen. As well as this, Buffett and his team invest in publicly traded companies. We identified Berkshire’s top ten stock holdings earlier, but other notable stocks in the portfolio include Visa, Mastercard, Amazon and Aon.

Consequently, the prospective future performance of Berkshire Hathaway as a whole is dependent on the sum of its parts, as well as on the performance of its investment team.

As well as researching Berkshire’s underlying businesses and understanding how the company makes money, those who are thinking of buying Berkshire Hathaway shares should consider the following before making a decision:

• Do you like Buffett’s style of value investing which focuses on buying shares in high quality companies with a long-term mindset?
• Are you happy for Berkshire to use its earnings to reinvest rather than pay dividends?
• Do you believe that the team at Berkshire Hathaway can continue to outperform the market over the long-term?

Berkshire Hathaway Class A vs B

Investors who are interested in investing in Berkshire Hathaway will notice that there are two different classes of share available to purchase: Class A stock and Class B stock. But what’s the difference?

The most noticeable difference between the two is the price. Whilst, at the time of writing, one share of Class B stock costs around $450, one share of the Class A stock will set investors back a staggering $680,000. One Class B share is worth 1/1,500th of a Class A share and has 1/10,000th of the voting power.

Initially, there was only one class of Berkshire Hathaway stock. The company was successful and, unlike many other companies, Berkshire never split its stock meaning that share price kept going up and up.

In 1996, with shares trading at more than $30,000, Berkshire introduced a Class B share to make the stock accessible to individual investors. Subsequently, the Class B shares have been split once, in 2010. However, Buffett maintains that the Class A shares will never be split.

How to Buy Berkshire Hathaway Stock

Those who choose to invest with Admirals can buy shares in both Berkshire Hathaway Class A and Berkshire Hathaway Class B shares. Follow these steps in order to buy Berkshire Hathaway stock:

1. Register for an Invest.MT5 account and log in to the Dashboard.
2. Open your web trading platform.
3. Search for Berkshire Hathaway stock and open a price chart.
4. Enter the number of shares and click ‘Buy’ to send the order to the market.

Investing with Admirals

With an Invest.MT5 account from Admirals, you can buy shares in more than 4,500 companies and over 200 Exchange-Traded Funds (ETFs) from around the world. Clients of Admirals also get free access to a wide range of educational materials as well as many other benefits. Click the banner below to find out more:

INFORMATION ABOUT ANALYTICAL MATERIALS:   

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals investment firms operating under the Admirals trademark (hereinafter “Admirals”) Before making any investment decisions please pay close attention to the following:   

• This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
• Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
• With view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for prevention and management of conflicts of interest.
• The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
• Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
• Any kind of past or modelled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admirals for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
• Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.