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Why Berkshire Hathaway Stock Crashed 8% Today

By Rich Smith - Mar 18, 2020 at 5:28PM

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It owns a lot of other stocks, too. In a market crash, that's not a good thing.

What happened

Shares of Berkshire Hathaway (BRK.A 1.69%) (BRK.B 1.64%), the Warren Buffett investment vehicle and industrial conglomerate, collapsed 8.1% today for the Class B stock and 8.6% for the pricier Class A stock.

Warren Buffett in a crowd

Warren Buffett. Image source: The Motley Fool.

So what

Coronavirus is the instinctive (and mostly correct) answer. World Health Organization data has the respiratory disease now affecting more than 207,000 people in 166 countries. It's wreaking havoc on economies, and threatening to pull the whole world into recession.  

More specifically to Berkshire Hathaway, the coronavirus crisis is crashing stocks across the market, and every time the value of a stock that Berkshire owns in its portfolio sinks, Berkshire Hathaway's own value drops a little bit, too.

As my fellow Motley Fool Sean Williams pointed out on Tuesday, with the value of shares of Berkshire holdings Apple, Bank of America, and American Airlines (among others) plunging, the total paper losses Berkshire has suffered on its portfolio have now passed $86 billion.

Now what

And all of this is in addition to whatever damage coronavirus is doing to the companies that Berkshire Hathaway owns in their entirety. Restaurant closures are likely taking their toll on foot traffic at Dairy Queen this very moment, for example. A slowing economy is decreasing the need for freight traffic on BNSF Railway. (On the other hand, I kind of think that Duracell sales are probably doing pretty well right now, what with all the doomsday prepping going on.)

Viewed as a whole, though, what we're seeing here is Berkshire Hathaway stock being doubly punished for both owning businesses in its own right, and for holding stock in other businesses that are threatened by the coronavirus. But the upside of all this is that once the virus is finally put to bed, and the economy starts to recover, Berkshire Hathaway stock should reap twice the benefits.

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Stocks Mentioned

Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$415,850.00 (1.69%) $6,900.00
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$277.50 (1.64%) $4.48

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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