Berkshire Hathaway A and B shares

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What is the difference between Berkshire Hathaway A shares and B shares?

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Berkshire Hathaway chairman Warren Buffett said in a memo dated February 2, 1999 (updated on July 3, 2003 and on January 20, 2010) that Berkshire Hathaway Inc has two classes of common stock designated Class A and Class B.

The memo makes it clear on the differences between the two classes of shares. “A share of Class B common stock has the rights of 1/1,500th of a share of Class A common stock except that a Class B share has 1/10,000th of the voting rights of a Class A share (rather than 1/1,500th of the vote).”

Another point to note in the memo is the “convertible” aspect: “Each share of a Class A common stock is convertible at any time, at the holder’s option, into 1,500 shares of Class B common stock. This conversion privilege does not extend in the opposite direction. That is, holders of Class B shares are not able to convert them into Class A shares.”

“Both Class A & B shareholders are entitled to attend the Berkshire Hathaway Annual Meeting which is held the first Saturday in May,” said the memo.

Recommended reading:

(1) The Essays of Warren Buffett: Lessons for Corporate America, Third Edition

(2) Berkshire Hathaway Letters to Shareholders, 1965-2013

Berkshire Hathaway ‘A’ and ‘B’ shares

A new release by Berkshire Hathaway dated 10 July 2017 said that chairman Warren Buffett  that day converted 12,500 of his Class A shares into 18,750,000 Class B shares. “Of these Class B shares, 18,628,189 have been donated to five foundations: Bill & Melinda Gates Foundation, Susan Thompson Buffett Foundation, Sherwood Foundation, Howard G. Buffett Foundation and … Continue reading Berkshire Hathaway ‘A’ and ‘B’ shares

When it comes to stocks, Berkshire Hathaway looks for wonderful companies

“Woody Allen once explained that the advantage of being bi-sexual is that it doubles your chance of finding a date on Saturday night,” Warren Buffett said in his FY2015 letter to Berkshire Hathaway. Why did the Berkshire Hathaway chairman say this? “In like manner – well, not exactly like manner – our appetite for either … Continue reading When it comes to stocks, Berkshire Hathaway looks for wonderful companies

Berkshire Hathaway’s performance vs S&P 500

 

Berkshire’s Performance vs. the S&P 500

Per share book value of Berkshire Per share market value of Berkshire S&P 500 with dividends included
Compounded Annual Gain – 1965-2014 19.40% 21.60% 9.90%
Overall Gain – 1964-2014 751,113% 1,826,163% 11,196%

Data source: Berkshire Hathaway 2014 Annual Report

Excerpt from Warren Buffett’s letter dated February 27, 2015, to Berkshire Hathaway’s shareholders for FY2014:

“Berkshire’s gain in net worth during 2014 was $18.3 billion, which increased the per-share book value of both our Class A and Class B stock by 8.3%. Over the last 50 years (that is, since present management took over), per-share book value has grown from $19 to $146,186, a rate of 19.4% compounded annually.* During our tenure, we have consistently compared the yearly performance of the S&P 500 to the change in Berkshire’s per-share book value. We’ve done that because book value has been a crude, but useful, tracking device for the number that really counts: intrinsic business value. In our early decades, the relationship between book value and intrinsic value was much closer than it is now. That was true because Berkshire’s assets were then largely securities whose values were continuously restated to reflect their current market prices. In Wall Street parlance, most of the assets involved in the calculation of book value were “marked to market.” Today, our emphasis has shifted in a major way to owning and operating large businesses. Many of these are worth far more than their cost-based carrying value. But that amount is never revalued upward no matter how much the value of these companies has increased. Consequently, the gap between Berkshire’s intrinsic value and its book value has materially widened. With that in mind, we have added a new set of data – the historical record of Berkshire’s stock price – to the performance table on the facing page. Market prices, let me stress, have their limitations in the short term. Monthly or yearly movements of stocks are often erratic and not indicative of changes in intrinsic value. Over time, however, stock prices and intrinsic value almost invariably converge. Charlie Munger, Berkshire Vice Chairman and my partner, and I believe that has been true at Berkshire: In our view, the increase in Berkshire’s per-share intrinsic value over the past 50 years is roughly equal to the 1,826,163% gain in market price of the company’s shares.”

* All per-share figures used in this report apply to Berkshire’s A shares. Figures for the B shares are 1/1500th of those shown for A.


IBM shares down but Warren Buffett could be happy

Excerpt from a CNN Money report, How to invest like a billionaire, dated 31 December 2014: “The company (Warren) Buffett may regret buying the most this year though is IBM…It’s by far and away the worst performer among the 30 top American businesses in the Dow. IBM is trying to reinvent itself by laying off … Continue reading IBM shares down but Warren Buffett could be happy

Berkshire Hathaway’s fifteen common stock investments that at FY2013 yearend had the largest market value

 

12/31/13
Shares** Company Percentage owned Cost* Market
(in millions)
151,610,700 American Express Company 14.2 $1,287 $13,756
400,000,000 The Coca-Cola Company 9.1 1,299 16,524
22,238,900  DIRECTV 4.2 1,017 1,536
41,129,643 Exxon Mobil Corp 0.9 3,737 4,162
13,062,594 The Goldman Sachs Group, Inc 2.8 750 2,315
68,121,984 IBM Corp 6.3 11,681 12,778
24,669,778  Moody’s Corporation 11.5 248 1,936
20,060,390 Munich Re 11.2 2,990 4,415
20,668,118  Phillips 66 3.4 660 1,594
52,477,678 The Procter & Gamble Co 1.9 336 4,272
22,169,930  Sanofi 1.7 1,747 2,354
301,046,076   Tesco plc 3.7 1,699 1,666
96,117,069 U.S. Bancorp 5.3 3,002 3,883
56,805,984  Wal-Mart Stores, Inc 1.8 2,976 4,470
483,470,853 Wells Fargo & Company 9.2 11,871 21,950
Others 11,281 19,894
Total Common Stocks Carried at Market $56,581 $117,505
*This is our actual purchase price and also our tax basis; GAAP “cost” differs in a few cases
because of write-ups or write-downs that have been required under its rules.
**Excludes shares held by Berkshire subsidiary pension funds.

Data source: Warren Buffett’s letter dated February 28, 2014 for FY2013 to Berkshire Hathaway shareholders

Recommended reading:

(1) The Essays of Warren Buffett: Lessons for Corporate America, Third Edition

(2) Berkshire Hathaway Letters to Shareholders, 1965-2013