I’ve always wanted to own a piece of Warren Buffett’s magic, but at $111,111/share, Berkshire Hathaway (BRK.A) has been way too spendy for me. I’ve had to be content to watch from the sidelines. Smart investors bought 10 shares when it was outrageously priced at $10,000/share (circa 1992).
B-shares (BRK.B) were created for the common man, but even they were quite expensive at more than $3,000/share. On January 21, 2010, BRK.B split 50:1, bringing the share price down to a very reasonable $60-70. Now, Buffett can be bought by the unwashed masses.
I’ve been reading that BRK.B has “done well” since the split, and I initially interpreted this as the B shares were faring better than the A shares. Since the B shares have opened up a new market (small time investors) and the A shares are unchanged, it would make sense that the B shares would see new activity and might get a bump in value. But surely there’s a mechanism for institutional investors to arbitrage class B shares against the A shares. And indeed, as the Google finance graph below shows, the B shares have done exactly the same as the A shares. Both BRK.A and BRK.B both have done a bit better than the market average (S&P 500), but B is not better than A — only cheaper … uh… more affordable.
Full disclosure: No position in BRK.A or BRK.B
Science and Money Feed
balu
on Feb 10th, 2010
@ 7:06 am:
A shares rise in tandem with B shares. Before the A share price was adjusted to 30 times the price of the B share. Thus B share never outpaced the A share by much. After the split the A share is 1500 times the price of each B share or close to that amount
Revanche
on Mar 21st, 2010
@ 3:36 pm:
Well *some* of us are washed ….
I picked up a few B shares myself. Emphasis on FEW. I hope to buy a few more before they rise too much more in price.
Helen
on Mar 21st, 2010
@ 8:26 pm:
Revanche:
Glad to hear you jumped in! Good luck with BRK!