Investing with the Wizard of Omaha

Question: I'd like to buy Warrren Buffet's Berkshire Hathaway shares. I understand that there 2 kinds brk-a and brk-b. The b-share costs about 1/30 of an a-share but it isn't not convertible to a-shares. My friend advises me to buy a-share but cannot give me a reason. Is b-share really inferior to a-share other than the cost? Please help me. Chris, St. Paul MN

Answer: Billionaire Warren Buffett, the Wizard of Omaha, is perhaps the greatest stock picker of all time. He runs Berkshire Hathaway, a holding company with more than 70 businesses. The price difference between the two kinds of stock is astounding when translated into dollars and cents. As I am writing this an A-shares is worth $92,000 and a B-share $3001.50.

I can't say whether you should prefer Class A to Class B, but the key difference between the two classes of stock has to do with ownership rights.Class A shareholders have the full voting rights of stock ownership. A Class B shareholder gets 1/200th the voting rights of a Class A share. In essence, Class B shareholders have a stake in how well Buffett does as stock picker and chief executive, but they're largely disenfranchised as owners. For instance, if someone made a takeover offer for Berkshire the Class A shareholders get to decide whether the deal goes through or not. The Class B shareholders are along for the ride. Question is, does that matter to you?

The Wizard of Omaha describes the difference between the two shares here.

About the author

Chris Farrell is the economics editor of Marketplace Money.


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