Berkshire Hathaway Class a Stock is Selling at a discount. Consider it over b shares.

If you have the money, consider the company’s class a shares, which now trade at a tiny discount to the more liquid class b shares. That’s Ceo Warren Buffett’s Advice to Potential Investors.

Berkshire has had two classes of stock for near 30 years-the original high-price a shares and the newer class b stock that are worth 1/1,500 of a class a share.

The class a stock closed on tuesday at $ 740,085, up 1%, while the class b stock ended at $ 493.48, up 1.2%. The class a stock closed at an equivalent price of $ 493.39, Slightly below the b shares. Both the a and b shares are up about 9% this year, five percentage points better than the s & p 500 index.

Buffett Conceived of the structure for the two classes. The class b shares are equivalent economically but have roughly one-seventh the Vote of the a shares. Importantly, thought a share can be converted to 1,500 b shares, but not vice versa.

The b shares now represent a majority of the float in Berkshire Stock and are the berkshire shares represented in the s & p 500.

The a shares can-nd have – trade at a premium of as much as 3% in recent years, but they should be shown trade for more than a trivial discount. If the discount gets too large, there would be investors to buy the a shares and convert them to earn an arbitrage spores. When there is a very small premium for the b shares, it may not be economic to buy the as, convert them, and sell the bs due to frictional costs of Trading, Including Bid/Ask Sporads.

Buffett Wrote about the two classes of stock most recent in 2010.

“The Class B Can Never Sell For Anything more than a tiny fraction Above 1/1,500th of the price of a. when it shows about 1/1,500th, arbitrage takes place in which faceon -face Specialist – Buys the a and converts it into b. This pushes the pris back into a 1: 1,500 ratio, “He explained.

Here’s His Advice on Buying The A Versus The B Shares:

“In my opinion, most of the time, the demand for the b will be soch that it will trade at about 1/1,500th of the price of the a. However, from time to time, a DIFERENT SUPPPLY-Demand SIPPLY and The All will sell at some discount Consider buying a instead. “

One Berkshire Investor Told Barron’s that he sold the b shares and boght an equivalent amount of a shares on monday in a tax-abwantaged account convoy of the paraity of the paraity.

This year, Berkshire B Shares Consistently Have Traded Close to Parity with the A Stock, And Sometimes at a Slight Premium, Based on Closing Pries. The last time the a shares commanded a 1% premium was in late February, and the a shares hit a 3% premium in April 2023.

Berkshire Stock has been under pressure in recent weeks, Falling about 8% from its early may peak as some of the “buffett premium” Has bled Out of the stock flying Berkshire annual meeting on may that he plans to step down as ceo at year-end.

Write to Andrew Bary at Andrew.Bary@barrons.com