Berkshire Hathaway (BRK.A 0.81%)(BRK.B 0.64%) is a holding company run by investing legend Warren Buffett. He took control of the former textile manufacturer in 1965 and transformed it into one of the largest companies in the world. It serves as his investment arm. Buffett uses the cash flows generated by Berkshire's operating businesses and investments to acquire other companies and make new investments that grow value for shareholders.
Berkshire Hathaway differs from other investment firms like hedge funds. Anyone can invest in Berkshire Hathaway if they have enough money to buy at least one share (less than $300 in early 2023). For comparison, hedge funds are only open to accredited investors, i.e., those who meet high income or net worth qualifications, and who can meet the fund's minimum investment, which can be $1 million or more. Berkshire Hathaway also doesn't charge exorbitant fees to its investors since it sees them as partners, not clients.
Buffett's company has a tremendous track record of growing value for shareholders. From 1965 through 2021, Berkshire's shares delivered a 20.1% compound annual return. That has outperformed the S&P 500 by almost two-to-one (the S&P 500 has produced a 10.5% compound annual return during that period).
Here's a step-by-step guide on buying Berkshire Hathaway shares and some factors to consider before investing in the company.
How to buy Berkshire Hathaway stock
To buy shares of Berkshire Hathaway, you must have a brokerage account. If you still need to open one, here are some of the best-rated brokers and trading platforms. Here's a step-by-step guide to buying Berkshire Hathaway stock using the five-star-rated platform TD Ameritrade.
TD Ameritrade makes it easy to buy stocks. It offers two options to place a trade. The first way is to click the "trade" tab at the top of the page:
From there, click the link for "stocks & ETFs." That will take you to the following page:
On this page, fill out all the relevant information, including the quantity of shares you want to buy, the ticker symbol (BRK.B for Berkshire Hathaway), and whether you want to place a limit order or a market order. You may want to consider a market order since it guarantees you buy shares immediately at the market price.
Once you finish filling out the order page, click the "review order button" at the bottom of the page. Review your trade, carefully ensuring you've selected the correct ticker and number of shares you desire to purchase. Once you're ready, click submit and become a Berkshire Hathaway shareholder.
The other way to place a trade on TD Ameritrade is through the "SnapTicket" box at the bottom of any screen. Clicking that will take you to the following box:
Fill out all the order information and then click the "review order" bottom. Review your trade and submit.
Should I invest in Berkshire Hathaway?
Before buying shares of Berkshire Hathaway, you need to determine if you want to invest directly in the company. First, let's go over a summary of how the company is managed.
Buffett and his investing partner, Charlie Munger, use the money Berkshire's businesses earn for its shareholders and reinvest it into:
- Businesses they can control by acquiring 100% ownership – Berkshire Hathaway's operating businesses include insurance, railroad, utilities and energy, and manufacturing, service, and retailing. Notable brands include GEICO, BNSF, Pampered Chef, Pilot Travel Centers, Fruit of the Loom, and See's Candies.
- Buying publicly traded stocks to passively own pieces of high-quality businesses – Some of the top stocks Warren Buffett's company owned as of early 2023 included Apple (AAPL 1.6%), Coco-Cola (KO 0.57%), American Express (AXP 2.62%), and Kraft Heinz (NYSE:KHC).
Here are some reasons to consider purchasing the company's stock:
- You believe Berkshire Hathaway can deliver a higher return than an S&P 500 index fund.
- You like Warren Buffett's investment style and want to entrust him and his team with your money.
- You don't need to earn dividend income.
- You believe Buffett and his team can put Berkshire's retained cash flows and cash balance to work in growing shareholder value over the long term.
- You understand how Berkshire Hathaway makes money and want to follow the company.
- You realize that your investment in Berkshire Hathaway could lose money and might underperform the S&P 500.
On the other hand, here are some factors to consider that might make you opt not to purchase shares of Berkshire Hathaway:
- You're worried about the ages of Warren Buffett and Charlie Munger and whether their eventual successors will stick to the blueprint they laid out for growing shareholder value.
- You're nearing or in retirement and need dividend income.
- You don't firmly believe that Berkshire Hathaway can outperform the S&P 500 over the long term.
- You are a younger, more growth-oriented investor and don't like Buffett's value investing approach.
- You're too busy to follow Berkshire Hathaway and don't desire to invest directly in individual stocks.
Buffett and his investing partner, Charlie Munger, use the money Berkshire's businesses earn for its shareholders and reinvest it into:
- Businesses they can control by acquiring 100% ownership – Berkshire Hathaway's operating businesses include insurance, railroad, utilities and energy, and manufacturing, service, and retailing. Notable brands include GEICO, BNSF, Pampered Chef, Pilot Travel Centers, Fruit of the Loom, and See's Candies.
- Buying publicly traded stocks to passively own pieces of high-quality businesses – Some of the top stocks Warren Buffett's company owned as of early 2023 included Apple (AAPL 1.6%), Coco-Cola (KO 0.57%), American Express (AXP 2.62%), and Kraft Heinz (NYSE:KHC).
Is Berkshire Hathaway profitable?
Profit growth helps power stock price appreciation over the longer term. That makes it a good area for beginning investors to focus on before buying shares.
Berkshire Hathaway is a consistently profitable company. In 2022, the company posted a $30.8 billion operating profit. That was a 12.2% increase from 2021's total and the highest in the company's history.
The company retains all its earnings to allocate towards growing shareholder value. It also holds a lot of cash on its balance sheet -- $128.7 billion at the end of 2023 -- that it intends to deploy when it finds compelling investment opportunities.
Does Berkshire Hathaway pay a dividend?
While Berkshire Hathaway is a very profitable company, it doesn't pay dividends to its shareholders. CEO Warren Buffett believes he and his team can create more value for shareholders by retaining that cash and allocating it toward initiatives that create shareholder value. Those options include reinvesting it into existing businesses, making acquisitions, or repurchasing shares when they trade at a discount to the company's estimated intrinsic value.
ETFs with exposure to Berkshire Hathaway
Instead of actively buying shares directly, you could passively invest in Berkshire Hathaway stock by investing in a fund holding its shares.
Berkshire Hathaway is among the larger publicly traded companies by market capitalization. Because of that, it's a widely held stock. Berkshire is in several stock market indexes, including the S&P 500 index. As a result, index funds and exchange-traded funds (ETFs) that benchmark their returns against those indexes hold Berkshire Hathaway stock.
According to ETF.com, 217 ETFs hold a reported 125.7 million shares of Berkshire Hathaway. The biggest holder is the SPDR S&P 500 ETF Trust (SPY 0.95%), with almost 19.4 million shares. However, the ETF with the largest allocation to Berkshire Hathaway is the Financial Select Sector SPDR Fund (XLF 1.07%) at 15% of the fund's total holdings compared to 1.64% from the SPDR S&P 500 ETF trust. That makes the Financial Select Sector SPDR Fund a better option for those seeking a more passive way to gain some exposure to Berkshire Hathaway without directly buying shares.
Will Berkshire Hathaway stock split?
Berkshire Hathaway has never implemented a stock split for its Class A shares (BRK.A). That's one reason those shares traded at around $450,000 apiece in early 2023. It will likely never spit that class of its stock.
However, to make its stock more accessible to more investors, Berkshire created Class B shares in 1996 with a much lower price point. The company has only split that stock once. It completed a 50-for-1 split in 2010. At the time of that split, shares were trading at around $3,500.
As of early 2023, Berkshire had not announced an upcoming stock split. With the Class B shares trading at around $300 a share at that time, it doesn't seem likely that Berkshire will split its stock anytime soon, given its historical trend.
The bottom line on investing in Berkshire Hathaway stock
An investment in Berkshire Hathaway is one in Warren Buffett and his team. It's a wager that they can allocate the cash flows produced by Berkshire Hathaway's operating businesses and investments to create more value for shareholders. They have done a phenomenal job growing value for investors over the years. While that past success is no guarantee of future returns, Berkshire Hathaway has the potential to be a great long-term investment.
