Berkshire Hathaway, led by the legendary investor Warren Buffet, is known for its expensive stock prices. In this article, we will delve into the reasons behind the high price of Berkshire Hathaway shares, the advantages it offers to long-term investors, and the company’s diverse portfolio.
The Price Tag
Compared to other stocks, Berkshire Hathaway’s Class A shares come with a hefty price tag. Priced at around $554,300.00 per share (current noted price ), they are significantly more expensive than the most other expensive stock, NVR, Inc. (NVR), Chipotle & other. The high price of Berkshire Hathaway shares is a result of Buffet’s steadfast refusal to split the stock, aligning with his buy-and-hold investment approach.
The Attraction for Long-Term Investors
Warren Buffet has stated that the high price of Berkshire Hathaway shares serves as a filter, attracting the kind of investors he desires – patient individuals focused on long-term growth rather than quick profits. Buffet believes that a lower-priced stock often invites more volatility and lacks the intrinsic value creation he seeks for his investors. By maintaining a high price, Buffet ensures that the shareholders are committed for the long haul.
The Performance of Berkshire Hathaway Stock
Despite its high price, investing in Berkshire Hathaway has proven to be lucrative for long-term shareholders. Over a five-year period, the value of the stock has 10-Year Average Annualized Return of +12.0% .This consistent growth is a testament to the strong performance of the company and its ability to generate intrinsic value for investors.
Class A vs. Class B Shares
While Class A shares of Berkshire Hathaway remain unsplit, Buffet introduced Class B shares in 1996, which are more accessible to a wider range of investors. Class B shares are subject to stock splits, unlike their Class A counterparts. In fact, a stock split occurred on January 21, 2010, in a ratio of 50:1. This move allowed more investors to enter the market and invest in Berkshire Hathaway.
Berkshire Hathaway’s Market Capitalization and Holdings
With a market capitalization of $769.6 billion, Berkshire Hathaway is one of the largest companies in the world. Warren Buffet owns approximately 15% of the company through Class A shares and a minor stake through Class B shares. The company’s portfolio includes major positions in well-known companies such as Apple, Bank of America Corp., Chevron, the Coca-Cola Company, and American Express. This diverse portfolio reflects Buffet’s strategy of investing in companies with strong fundamentals and long-term growth potential.
The Business Empire of Berkshire Hathaway
Berkshire Hathaway, headquartered in Omaha, Nebraska, is a holding company with a wide range of businesses under its umbrella. These businesses span various sectors, including insurance, energy supply, manufacturing, wholesale and retail, and rail freight. This diverse portfolio provides Berkshire Hathaway with stability and allows it to weather economic downturns in specific industries.
End Line
Berkshire Hathaway’s expensive stock price reflects Warren Buffet’s investment philosophy and attracts long-term investors who prioritize steady growth over short-term gains. Despite its high price, investing in Berkshire Hathaway has proven to be rewarding for those who hold onto their shares for an extended period. The company’s diverse portfolio and strong market capitalization further contribute to its appeal as a solid long-term investment.
Remember, this is not financial advice – always consult a professional for personalized guidance.
