How to invest in Warren Buffett’s Berkshire Hathaway

Are you tempted to invest in Berkshire Hathaway, Warren Buffett’s company? After all, he is one of the most feted investors in history and shares in his company are available to anyone. But you may get a shock if you look up the share price: at the time of writing, one share would cost you about $600,000 (about £480,000).

And no, it’s not a misprint, even though you may be amazed that a single share could cost so much. Shares in most British companies trade at a price between a few pence and a few pounds, although occasionally a single share could cost you £100 or so (AstraZeneca, whose shares currently change hands for about £122, is one prominent example).

Why then are shares in Berkshire Hathaway so expensive? Part of the answer is simply that the company has grown in value enormously since Buffett took charge in 1965. But plenty of other companies have also grown spectacularly without ending up with a share price in the hundreds of thousands of dollars.

The reason is that those companies have carried out what are known as ‘share splits’: they have subdivided their shares into, for example, 10, 50 or 100 new shares after a rise in the price has put the shares out of reach for some private savers. Warren Buffett has refused to do this with Berkshire Hathaway shares. He wrote in a letter to shareholders in 1996 that ‘we don’t believe in splitting Berkshire stock’.

But the consequence was that very few private savers could afford to buy even a single share in Berkshire (and if they did pull out all the stops to buy that one share, they could end up with a very unbalanced portfolio!).

Buffett provided a solution by introducing, in 1996, another way to invest in Berkshire Hathaway: he created a second, much more affordable type of share. This second ‘share class’ goes by the name of ‘B shares’ to distinguish them from the original ‘A’ shares (the ones that cost $600,000 each). In passing we should note, however, that he did so reluctantly: he said he was pushed into it by the emergence of funds that proposed to invest in Berkshire shares as a way to give ordinary savers access. Buffett said he didn’t want these funds to profit from savers in this way so he created an alternative route to owning a stake in his company.

The current price of a ‘B’ share is about $400 (£320). That’s still not exactly cheap but many private investors of ordinary means will be able to put some money into Berkshire via the ‘B’ shares as part of a balanced portfolio.

Fidelity customers can hold the ‘B’ shares (and the ‘A’ shares, for that matter) in an ISA or general Investment Account, although not currently in a SIPP. We offer shares in American companies via what are called ‘Crest depositary interests’ and at the moment these ‘CDIs’ cannot be held in our SIPPs.

If you want to invest in Berkshire Hathaway or any American stock you will first need to fill in a form called a W-8BEN for tax purposes.

Other ways to invest in Berkshire Hathaway

If you would like to avoid the complexities of investing in US stocks, some British funds have a stake in Berkshire Hathaway. Some have appreciable holdings: the Fidelity Global Financial Services Fund, for example, had 6.9% of its money in Buffett’s company at the end of March, the most recent data available, while the Thesis Headway fund had 8.8% of its assets in Berkshire, its largest holding, according to Morningstar’s most recent information. Among funds in Fidelity’s Select 50 list, the Legal & General Global Equity Index Fund has just over 1% of its money in Berkshire, while the Vanguard S&P 500 UCITS ETF has 1.7%, according to the most recent factsheets.

Not surprisingly, a British fund purposely run on Buffett-like principles and named after him, the Sanford DeLand UK Buffettology fund, has an appreciable stake of 5.8%. Eric Burns & David Beggs of Sanford DeLand told Fidelity that they owned Berkshire Hathaway because it offered ‘the US market but with something extra on top’, although they stressed that, because Berkshire had now grown to an enormous market value of about $862bn, the 20%-plus average annual returns it had made in the past were very unlikely in future.

Both are attending Berkshire Hathaway’s legendary annual meeting – otherwise known as ‘the Woodstock of capitalism’ – this weekend. They have attended in the past but Burns said it was ‘a bit like going to church – it’s useful to hear the sermon again’.

He said it was striking that the vast majority of the attendees were ‘normal people from all walks of life’ who had entrusted Buffett and his late business partner Charlie Munger with their savings over the past few decades and had accumulated significant wealth as a result. He said they contrasted with the ‘business folk in suits and on expenses’ he normally encountered in the course of his work.

Holders of either the ‘A’ or ‘B’ class of Berkshire Hathaway stock are entitled to attend the meeting. It is also being streamed on CNBC.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in a SIPP or ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. Withdrawals from a SIPP will not normally be possible until you reach age 55 (57 from 2028). Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment.  If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.