If You Bought 1 Share of Berkshire Hathaway (BRK-A) When Buffett Took Control, Here’s How Many Class B Shares You’d Own Now
Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), the cross-industry conglomerate led by investing genius Warren Buffett, has long been a fascinating study in investment success. For those fortunate enough to have bought Berkshire stock early, the returns have been nothing short of remarkable.
Here’s a look at how many shares you would own today if you had bought a single share at the company’s IPO and eventually converted it into Class B shares, as Berkshire Class A owners can do any time.
Berkshire Hathaway’s stock structure
The company manages two classes of stock: Class A (BRK-A) and Class B (BRK-B). The BRK-B shares were introduced in 1996 to provide an affordable entry point for smaller investors (but the lower-priced shares also come with fewer votes). Each Class A share is convertible into a larger number of Class B shares — originally 30, but 1,500 stubs nowadays to account for the Class B security’s 50-for-1 stock split in 2010.
Imagine you had bought a single BRK-A share when Buffett took control of the struggling textile company in 1965. You then converted it into BRK-B shares when they were introduced and held through the 50-for-1 split in 2010. You would have:
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Initial purchase: 1 BRK-A share
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Conversion in 1996: 1 BRK-A share converted to 30 BRK-B shares
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2010 stock split: 30 BRK-B shares split 50-for-1, resulting in 1,500 BRK-B shares.
Long-term returns on early Berkshire investments
The end result would have been the same if you had held that first share longer and converted it after the Class B split. Either way, you’d have 1,500 Class B shares today.
Or you could have held on to that original stub, watching it rise from about $20 in 1965 to $657,600 today. This strategy would greatly increase your voting power, though the money-making returns would be nearly identical.
Either way, you’d enjoy a 3.3 million percent return on your investment, or a compound annual growth rate (CAGR) of 19.3% over 59 years. There’s financial magic in robust annual returns across several decades of patient ownership.
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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
If You Bought 1 Share of Berkshire Hathaway (BRK-A) When Buffett Took Control, Here’s How Many Class B Shares You’d Own Now was originally published by The Motley Fool
