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Berkshire Hathaway stock split: Will Warren Buffett change his mind on pricey BRK shares?

By Rob Griffin

Edited by Vanessa Kintu

09:44, 24 August 2022

Berkshire Hathaway company name on a laptop screen
Berkshire Hathaway is involved in a range of areas, including insurance, real estate and energy Photo: monticello / Shutterstock

Berkshire Hathaway’s (BKR) share price soared to a record high this year – but will the increases persuade the company to split its stock?

The conglomerate run by billionaire investor Warren Buffett enjoyed an impressive start to 2022 despite global uncertainties. The strong performance has made investors question whether the company could follow fellow corporate giants, like Amazon and Tesla, in carrying out a BRK stock split.

Here, we take a look at the company’s stock price history, consider the pros and cons of stock splits, and ask analysts what they expect to happen over the coming months.

What is Berkshire Hathaway?

Berkshire Hathaway is a holding company based in Omaha, Nebraska, US, that’s involved in a wide variety of areas, including insurance, real estate and energy. Its chairman and CEO is Warren Buffett, whose investment success over many decades has led to him being dubbed the ‘Sage of Omaha’.

In his most recent letter to shareholders, Buffett pointed out that the company’s shareholders own many dozens of businesses.

“Some of these, in turn, have a collection of subsidiaries of their own,” he wrote. “For example, Marmon has more than 100 individual business operations, ranging from the leasing of railroad cars to the manufacture of medical devices.”

Currently, its largest holdings include a cluster of insurers, technology giant Apple (AAPL), US freight railroad operator BNSF Railway and energy holding company Berkshire Hathaway Energy (BNE).

Berkshire Hathaway: How has it performed?

It’s been a good year for Berkshire Hathaway, with investors attracted by its mix of reliable, trusted companies at a time of global uncertainty. The company has two classes of common stock, designated as Class A and Class B, which are both listed on the New York Stock Exchange (NYSE).

Berkshire Hathaway Class-A shares 5-year price chart

Berkshire’s A-class stock is the original stock. It is the world’s most expensive share, having closed at $447,154 on 19 August, 2022. It reached an all-time high of $539,180 on 28 March, 2022, just over 20% higher than its current level.

Berkshire Hathaway Class-B shares 5-year price chart

The price of the more affordable B-class shares stood at $297.28 as the market closed on 19 August, 2022. The all-time high for this stock was $359.57 on the same date in March.

According to a recent broker note from Greggory Warren, a sector strategist at Morningstar, the shares are “modestly undervalued”. As of 23 August, he had a fair value rating of $537,000 a share on the A-shares and $357 on the B-shares.

What is a stock split?

A stock split is a corporate action that involves the division of each of a company’s shares into multiple shares, which increases the total stock in the company. This has the effect of revaluing the price per share. The company’s overall market capitalisation does not change.

For example, if an investor owns 100 shares valued at $50 each, the total value of their investment is $5,000. If the company splits its stock by 2, the investor will own 200 shares, but each will only be worth $25. Their total investment will still be worth $5,000.

Stock splits: Good or bad news?

There are a number of reasons why a company may look to split its stock, according to Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown:

“Dividing the shares into smaller units can increase demand for the shares, making an individual share a little more affordable for individual investors.”

Lower share prices are also useful when it comes to remunerating staff with share options, which is often used to incentivise employees.

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“A company might want to give a junior member of staff a bonus in shares worth a few thousand pounds or dollars, but if the share price is too high then it can’t do that very easily.”

Streeter also pointed out a soaring stock price can present other challenges, noting that “in more extreme cases, a high share price can also make mergers and acquisitions more difficult”.

So, is a stock split good news or bad? Well, the overall value of shares won’t change after a stock split, apart from the usual market movements. The only discernible difference, as far as an investor is concerned, according to Streeter, will be that the number of shares they own will have gone up.

“A little extra demand for the shares might make a slight difference to the share price, and the split has probably made life a little easier for management, but stock splits don’t change the intrinsic value of a company or your shareholding,” added Streeter.

Berkshire Hathaway’s stock split history: What has happened?

What is the BRK stock split history? This is a slightly complicated question, as Berkshire Hathaway has two classes of common stock, designated as A-class and B-class. Buffett has never sanctioned the splitting of A-class shares, as he believes this would go against his buy-and-hold investment philosophy.

However, the company introduced B-class shares in 1995 after the share price soared above $30,000, prompting him to face longer-term concerns. In his letter to shareholders that year, Buffett explained the new class was a response to the “threatened creation of unit trusts” that would have marketed themselves as Berkshire lookalikes.

“In the process, they would have used our past, and definitely non-repeatable, record to entice naïve small investors and would have charged these innocents high fees and commissions,” he wrote.

So, when did Berkshire Hathaway stock split?

The B-class shares were split in January 2010. At the time they were around $3,500, which put them out of many investors’ reach.

Berkshire shareholders approved a 50-for-1 stock split as a way to improve accessibility to potential investors. The stock price subsequently went down to around $66.

Berkshire Hathaway stock split: Will it follow others?

A number of corporate giants have split their stock this year. Back in March, Amazon (AMZN) revealed a 20-for-1 stock split in filings to the US Securities and Exchange Commission (SEC). The split, the fourth since the company went public in 1997, saw Amazon shareholders receive 19 additional shares for each one held.

In mid-July, Alphabet (GOOG), the parent company of Google, executed a stock split for the second time in the company’s history. The 20-for-1 split, which comes just over eight years since the previous such action, meant investors received an additional 19 shares for every one they owned.

The most recent addition to this list is Tesla (TSLA). The electric vehicle manufacturer (EV) announced in early August a three-for-one split to make stock ownership more accessible to employees and investors. Each stockholder of record on 17 August will receive two additional shares for each one they hold.

What do the analysts predict?

How likely is another Berkshire Hathaway stock split? Is the company likely to follow the route taken by other major companies and split the stock this year? 

It’s not very likely, according to Streeter, who doesn’t expect Buffett to sign off on a stock split any time soon.

“I haven’t seen any reason to expect a stock split for Berkshire Hathaway,” she told Capital.com. “Its shares have been trading higher than this current level and it did not prompt a split.”

Whether a split would ever be on the cards could depend on the company’s overall aims and objectives, according to Streeter.

“Stock splits don’t alter the overall value of the shares an investor owns,” she said. “They’re designed to attract new investors. That does not seem to have been a priority for Berkshire Hathaway.”

FAQs

Will Berkshire Hathaway stock split again

As of 23 August, no plans have been announced for a further stock split. In fact, analysts believe an imminent stock split is unlikely. Analysts point out the shares have been higher in the recent past and that wasn’t enough to prompt a split.

What was the price of BRK b when it split?

The price of BRK B stock was around $3,500 before the stock split on a 50-for1 basis on 21 January, 2010. This brought the price per share down to around $66.

Is Berkshire Hathaway a good investment?

Only you can decide whether Berkshire Hathaway is a good investment for you. It’s important to do your own research. Your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio and how comfortable you feel about losing money. And never invest more than you can afford to lose.

 

Markets in this article

BRKb
Berkshire Hathaway
434.80 USD
-7.03 -1.590%
GOOG
Alphabet Inc - C (Extended Hours)
179.67 USD
-0.21 -0.120%
AMZN
Amazon.com Inc (Extended Hours)
182.84 USD
-1.65 -0.900%
AAPL
Apple Inc (Extended Hours)
224.55 USD
-0.28 -0.120%
TSLA
Tesla Inc (Extended Hours)
239.25 USD
-11.34 -4.530%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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