BRK.A vs BRK.B - What's the Difference? [2022 Guide]
Beyond knowing the difference between each class of Berkshire Hathaway shares we think it’s important to know the fundamental differences and value of one class of shares over the other.
We’ll start off with a brief explanation of the difference between each class, then dive into some numbers and fundamentals of each class of shares and which class is the better buy currently for your personal situation — and if you even would have a possibility to buy Berkshire class A shares.
But to put it simply and not bury the lead — it doesn’t really matter which class of share you buy when it comes to Berkshire Hathaway’s stock — if you have the money for it or you can buy fractional shares of brk.a then they’re arguably slightly better as they can, at any point, be converted into brk.b shares, but historically both shares have performed identically and they both have ownership rights over the same company.
Keep in mind not all companies are like berkshire, and sometimes the share differences are huge — some companies class B shares have no voting rights at all, or aren’t entitled to dividends — which may not be the case here with Berkshire, but don’t think just because Berkshire’s class a and b shares are so similar that all companies class a and b shares are similar — because they aren’t always that similar.
Sometimes they represent two different legal entities, part of the same corporation, which can result in higher or lower dividend taxation — so sometimes it’s really important to know which share is right for your situation.
Table of Contents
What's the Difference Between BRK.A and BRK.B?
There’s very little difference between each type of Berkshire shares — both have the same rights to dividends and stock equity, as well as voting rights.
The only differences between brka and brkb is their traded price and one feature BRK.A shares have — that they can convert into BRK.B shares anytime they want, while BRK.B shareholders can never convert their shares into Class A shares. This fundamentally doesn’t matter as both shares have the exact same rights otherwise.
Will The Right To Convert Matter In the Future?
It’s unlikely in our opinion, as ultimately it’d piss off shareholders at large if they suddenly gave BRK.A shareholders benefits over BRK.B shareholders, and this would be a horrible decision for the company and it’d likely cause a rebellion amongst shareholders. We’d say it will literally never matter — however there will still likely be a small outperformance in BRK.A shares regardless, as we’ll mention below.
Which Berkshire Share is Better Historically?
Personally we don’t invest in Berkshire — however if you do so we’d say statistically speaking if you have access to BRK.A shares (either having enough money to buy a share or with a brokerage with fractional shares) then they’d be the better choice as they have a bit more flexibility, and in the ultra long-term BRK.A shares grew 0.025% faster than BRK.B shares in value. Ultimately that’s so small it doesn’t really matter, but hey, it’s something — BRK.A shares are also slightly less volatile and margin-issues are less likely to occur if you hold BRK.A over BRK.B in a margin account.
But truthfully it doesn’t really matter — which is not the normal case for companies with multiple share classes, as others such as Royal Dutch Shell and Under Armor have huge differences in their share classes.
Why are BRK.A shares worth more than BRK.B shares?
This is simply because BRK.A shares represent a multiple of BRK.B Shares — meaning for every BRK.B share you own you only have a fraction of the amount of ownership as a single BRK.A share, however if you own a certain amount (currently 1500 shares) then you’d have equal ownership as one BRK.A share.
Is Berkshire Hathaway Class A or Class B Stock a Good Investment?
Berkshire Hathaway generally performs about as good as the broader market, often a little bit better, so generally most people would say it’s a good investment. Both Berkshire Hathaway Class A and Class B shares would be a good investment to most people as a result.
However it’s important to understand that past performance doesn’t mean future performance will be the same — Berkshire is heavily invested in Apple and Bank of America, so if you aren’t bullish on those companies, or some of Berkshire’s businesses like Geico, then you may not personally consider Berkshire a good investment for the future.
Personally we don’t have any problems with Apple, however we’re concerned over the lack of innovation of Berkshire’s businesses and the potential risks if the unfortunate happens and the lead of Berkshire shifts, so we don’t heavily invest in Berkshire ourselves.