Berkshire Hathaway offers two types of stocks-Class A (BRKA) and Class B (BRKB). Confused as to which one to choose? This BRKA vs BRKB comparison aims to help you with that choice. They have similarities as well as differences among them.
To make an efficient choice, it is important to know them both. Accordingly, you can get the one that suits your needs and circumstances.
Without further ado, let’s dive into the discussion.
BRKA vs BRKB Comparison – The Differences
Multiple differences exist between BRKA and BRKB. Here is a quick overview of them.
- Costlier stocks
- More voting rights
- Can be converted to BRKB stocks
- Cannot be partly liquidated
- Less expensive and can be purchased directly
- Lesser voting rights
- Cannot be converted
- Can be partly liquidated
An essential part of the BRKA vs BRKB comparison is the difference between the two types of stocks. Take a look at the following discussion on their differences to know more about what each type entails.
The main difference between the two types is the price per stock. The BRKA stocks are costlier. Earlier, they used to be the only class of stocks offered by the Berkshire Hathaway company. With time and demand, they introduced another low-cost, more common class of stock.
This led to the BRKA stocks being split and gave rise to BRKB stocks. If you have a lot to invest in one go, BRKA stocks are the right choice. However, if you want to invest in a more graded fashion, you can buy multiple BRKB stocks.
BRKB stocks’ lower price also gives way for potential tax benefits. You can easily pass them down to heirs without incurring gift taxes. However, in the case of BRKA stocks, this tax is often applied due to its high price.
BRKB stocks were essentially split from the larger collective of BRKA stocks. Subsequently, stockholders, who bought BRKB stocks, had lesser voting rights. These were essentially treated as long-term investments.
The company marketed these shares as an open-ended offering. This is to prevent volatility if concerns regarding supplies arise.
Ways to Purchase
BRKB stocks were introduced to provide a way for investors to buy the stocks directly. Earlier, they had to rely on mutual funds or unit trusts which mirror the holdings of Berkshire Hathaway. This was also dangerous in many ways.
As Warren Buffet himself had explained, the dangers included unit trusts that marketed themselves as Berkshire Hathaway. They would have extracted more fees and commissions from gullible investors than are necessary. They would have used non-repeatable records for this process.
The company was visibly concerned with this issue. Not only did it mean unsatisfied trust holders but also a bad reputation of the company itself.
Right to Convert
Another key difference between these two types of stocks is the right to convert. This essentially means that BRKA shares can be converted to BRKB shares at any point in time. On the other hand, no such change can take place for BRKB.
You cannot change your BRKB shares to BRKA shares. If you want to purchase BRKA shares, you can do so separately or sell your BRKB shares and buy afresh.
This difference does not give any significant benefit to one share over the other. However, if you have BRKA stocks and ever want a more granular division of your investments, you can convert them to BRKB.
The next difference to discuss in this BRKA vs BRKB comparison is the flexibility of the two types. If you own BRKB shares, you can liquidate a part of your holdings in the company.
You have the option to do this just up to the amount required for cash flow. In this regard, BRKB stocks offer flexibility to investors.
The same, however, cannot be said for BRKA stocks. Even if you own just one BRKA share, you have to sell it whole to acquire any amount.
This is the only way, even if the price of the share exceeds the amount you require. Combined with the fact that BRKA shares are costlier, this can seem like a risky move.
Although BRKA stocks had split to form BRKB ones, there is a bleak possibility of any split happening in the future. This is why in the BRKA vs BRKB comparison, the BRKA stocks provide more security for long-term investment.
On the other hand, BRKB stocks have the potential to split in the future. However, this might not necessarily mean a disadvantage for existing BRKB stockholders.
BRKA vs BRKB Comparison – The Similarities
As we have established the difference between the two types of stocks, we should look at the similarities. To get comprehensive knowledge, it is essential to know both. The following are the similarities between the two stocks.
- Both the stocks have the same dividend rights
- Shareholders of both stocks have the same stock equity
Which One to Choose?
To make a good investment, it is important to choose the type that suits you best. We are nearing the end of this BRKA vs BRKB comparison. Therefore, here is some parting advice on which stock you can choose.
BRKA stocks provide a more stable option. If you have enough money to invest, you should go for them. They are slightly more flexible and less susceptible to margin-issues.
They are also less volatile. Additionally, in the long run, BKA shares are projected to grow 0.025% faster than BRKB share values.
This might be only a small amount, but it still holds leverage over BRKB values. Even if you do not have enough money to buy these shares directly, you can get them via a brokerage with fractional shares.
Overall, however, this does not matter. The differences between these two classes of stocks from Berkshire Hathaway can be easily ignored in the larger scheme.
This may sound dubious, given how most companies have a considerable difference in their stock classes. Nonetheless, it is quite true.
When investing, you need to study all that it entails thoroughly. Hopefully, this BRKA vs BRKB comparison has equipped you with the necessary knowledge. The final decision lies with your requirements and resources. Nevertheless, comprehensive knowledge is always helpful.