How To Buy Berkshire Hathaway (BRK.B) Stock
It’s not hard to understand why Warren Buffett’s Berkshire Hathaway is one of the most famous public companies on earth. In the third quarter of 2021, Berkshire posted operating earnings of a whopping $6.5 billion, up 18% from the year before. The company’s shares gained nearly 30% in 2021.
If you’d like to own a slice of a company whose stock might be more expensive than your mortgage, look no further than Berkshire Hathaway’s class A shares (BRK.A). For those who’d prefer a more economical option, Berkshire Hathaway’s class B shares (BRK.B) are very affordable.
How to Buy Berkshire Hathaway
Evaluate Berkshire Hathaway’s Finances
With a market capitalization over $600 billion, Berkshire is among the ten largest U.S. public companies. If it were a mutual fund, it’d be the biggest fund on earth.
Berkshire owns stakes in countless companies, including the likes of Coca Cola, American Express and Bank of America—and operates a number of major subsidiaries, like GEICO, Dairy Queen and Clayton Homes.
But just because it owns plenty of big names doesn’t mean you shouldn’t do due diligence to make sure a potential investment in Berkshire is right for your portfolio.
When buying a stock like Berkshire Hathaway, you should always begin by evaluating its financial filings, starting with its annual reports (Form 10-K) and quarterly reports (Form 10-Q). These reports, typically referred to in financial media as earnings reports or quarterly earnings, detail the company’s most recent performance.
You’ll find them on Berkshire Hathaway’s investor relations site or in the SEC’s EDGAR database. Be sure to research expert analyses, like you might find on Fidelity, Morningstar or Forbes, for more insight into these financial filings.
Decide on Your Investment Goals
Before you start buying shares of Berkshire Hathaway, you should make sure that investing in the company is consistent with your overall investment goals.
For example, is your primary reason for investing to generate appreciation in your portfolio? If so, Berkshire may be a good fit. Since 1965, the company has provided 20% average annual returns, almost double the annual returns of the S&P 500. While past performance is no guarantee of future success, that fact alone could make BRK a great choice for long-term buy-and-hold investors.
If, on the other hand, you’re looking to generate passive income through dividends, then you may want to find another investment. Berkshire hasn’t paid a dividend since 1967, instead opting to reinvest its earnings to grow its holdings.
Decide If You Want BRK.B vs BRK.A
As mentioned above, Berkshire Hathaway stock comes in two flavors: BRK.A and BRK.B. You’ll need to figure out which you want in your portfolio.
BRK.A was Berkshire Hathaway’s first common stock offering (originally it was just BRK). As of December 2021, BRK.A was trading around a stratospheric $429,000 per share.
In the 1990s, when shares were priced at a comparatively paltry $30,000 or so, Warren Buffett opted to create a second class of shares rather than do a stock split to create more shares and lower the price of entry to Berkshire Hathaway ownership.
For most intents and purposes, BRK.A and BRK.B are identical, save the massive difference in price. BRK.B clocks in at a much more affordable $284 per share. This distinction was perhaps most significant before fractional share investing became more commonplace and potential investors had to shell out for full shares of BRK.A or BRK.B.
It’s also important to note BRK.A shares do come with significantly more voting rights, which makes sense given their much larger price, and the ability to convert to class B shares at any time. You cannot convert class B shares into class A.
Pick a Brokerage Platform
Once you know what kind of shares you want, you next need to settle on a place to buy them. If you already have a brokerage account, the easiest route is probably to just use your current provider.
But if you don’t have an account outside of an employer-sponsored retirement plan, check out our list of the best online brokers.
You’ll also want to ensure it provides commission-free trading of U.S. stocks—most major brokerages do now—and has offerings that will help you meet any other financial or investment objectives, like fractional share investing or tools to help you save and invest better.
Figure Out How Much You Want to Invest
Even Warren Buffett doesn’t have a limitless amount of money to devote to Berkshire. To determine how much to invest in BRK.A or BRK.B, ask yourself these four questions:
- What’s your budget? You should never invest money you need to cover your expenses. After you’ve set aside money for those and an emergency fund, if you don’t already have one, you can invest anything else that’s left to reach your wealth-building goals.
- What’s BRK.A or BRK.B’s current price? With fractional shares, of course, BRK’s price may be less of a determining factor, but if your brokerage doesn’t allow for you to buy portions of whole stocks, you’ll likely need to aim for BRK.B shares.
- What’s your investing strategy? People generally invest one of two main ways: They put down a large initial amount or regularly invest smaller amounts over months and years. This second process, called dollar-cost averaging, may help you pay a lower average price per share overall as well as can decrease the level of risk you take on at any time.
- What about your other investments? Chances are BRK isn’t your first or only investment purchase. You’ll want to evaluate how it fits in with your other investments and strategies.
Determine Your Order Type and Place Your Order
Once you have a brokerage account open and decide when to invest, it’s time to create your purchase order. If you want to make things simple, you can use a market order to buy your shares at the current price whenever you place your order.
If you’re a more sophisticated investor, or only want to invest if you can buy shares at a certain price, then you might consider using a limit or stop-limit order, which only enact trades when specific pricing conditions are met. Just know when you do this that it’s possible the stock may move away from the price you set as your limit, meaning you may not wind up with any shares.
Evaluate Berkshire Hathaway’s Performance
Investing isn’t a one-and-done activity. You’ll want to check in on how your Berkshire Hathaway investment is performing over time to make sure you’re on track to meet your goals and determine if you want to buy, sell or hold steady with BRK.
First, find its rate of annual return. This way you’ll have a data point that you can compare to other stocks and benchmarks like the S&P 500 and Nasdaq Composite Index. You may also want to revisit the fundamental data you looked at earlier to see how these figures develop over time.
How to Sell Berkshire Hathaway Shares
If you decide you’re ready to move out of your position in Berkshire, selling your shares is as easy as buying them. Again, you’ll have the option of selling at the market price or using stop or limit orders if you only want to sell at or above a certain price.
More importantly when selling, though, is the need to be mindful of taxes. If you bought your shares in a retirement account, then you don’t need to worry about this. But if you bought your shares in a normal brokerage account and will be making a profit, then you may incur capital gains taxes. (If you’re selling at a loss, on the other hand, you may be able to claim it for tax-loss harvesting purposes.)
If you’re likely to see large gains, make sure you speak with an accountant so you’re aware of the tax consequences you may incur.
Other Ways to Invest in Berkshire Hathaway
Berkshire Hathaway is an extremely large company. On its own, it’s about the ninth largest component of the S&P 500, meaning just about any large-cap index fund or exchange-traded fund (ETF) will have some amount of exposure to BRK.
For long-term passive investors, like those saving for retirement, these funds can be prime investment opportunities. Not only do they provide you with the growth potential of hundreds of companies, but they also minimize the risk that you may lose money on any one investment.