Berkshire Hathaway (BRK.A/BRK.B)

Berkshire Hathaway is a legendary American conglomerate holding company headquartered in Omaha, Nebraska. While it began as a struggling textile manufacturing firm, it was transformed into a global investment titan under the leadership of its chairman and CEO, Warren Buffett, and his long-time partner, Charlie Munger. Today, Berkshire is a corporate fortress, owning a vast and diverse collection of businesses outright (like GEICO insurance, BNSF Railway, and Dairy Queen) and holding significant stakes in publicly traded companies (such as Apple and Coca-Cola). It stands as the ultimate testament to the power of value investing, a philosophy that prioritizes buying wonderful businesses at fair prices and holding them for the long term. For investors, Berkshire Hathaway is more than just a company; it's a living, breathing case study in rational capital allocation, patience, and the incredible magic of compounding. It trades under two ticker symbols, BRK.A and BRK.B, representing two different classes of stock.

Berkshire's structure is unique and a key to its success. It's not a top-down, micromanaged empire. Instead, it operates on a philosophy of extreme decentralization. The dozens of subsidiary companies are run by their own management teams with almost complete autonomy, freeing Buffett and his team to do what they do best: allocate capital. The financial engine that powers this investment machine is its massive insurance operation. Insurance companies collect premiums upfront and pay out claims later. In the meantime, they get to invest this pool of money, known as the insurance float. For most insurers, the goal is just to break even on their underwriting and make money on the investments. Thanks to disciplined risk assessment, Berkshire's insurance businesses often achieve an underwriting profit, meaning they are essentially being paid to hold and invest billions of dollars of other people's money. This durable, low-cost source of capital has given Berkshire an enormous and permanent advantage, allowing it to pounce on investment opportunities whenever they arise.

If you want to invest in Berkshire, you have two choices. Understanding the difference is crucial.

These are the original shares of Berkshire Hathaway. Famously, Warren Buffett has never split the stock. His reasoning is that the sky-high price (hundreds of thousands of dollars per share) attracts high-quality, long-term-oriented investors, or “partners,” and discourages short-term speculators. Owning even one share of BRK.A is a significant commitment and a status symbol in the investment world. Each 'A' share carries one full vote in company matters.

By the 1990s, the price of 'A' shares had become prohibitive for almost everyone. In response, Berkshire created the Class B shares, affectionately known as “baby Berkshires.” Initially valued at 1/30th of an 'A' share, they were created to give smaller investors a way to join the party. In 2010, the 'B' shares were split 50-for-1, making them even more accessible. Today, they trade at a price that is easily within reach of the average investor. While they represent a much smaller economic interest (currently 1/1500th of an 'A' share), the key difference lies in voting rights: a 'B' share carries only 1/10,000th of the voting power of an 'A' share.

Beyond being a great investment for many, studying Berkshire is like enrolling in a free university for rational investing. Its history and principles offer timeless lessons.

Buffett famously said, “Life is like a snowball. The important thing is finding wet snow and a really long hill.” Berkshire Hathaway is that snowball. It perfectly illustrates the power of compounding—the process of generating earnings on an asset's reinvested earnings. By consistently allocating capital to productive businesses and letting the profits ride for decades, Berkshire has grown from a tiny seed into a financial giant. It's a powerful reminder that true wealth creation is a marathon, not a sprint.

Berkshire doesn't buy “stocks”; it buys pieces of businesses. The team focuses intensely on the underlying company, not the flickering stock price. They look for simple, understandable businesses protected by a durable competitive moat—a sustainable advantage that keeps competitors at bay. They also insist on honest and able management. This “business owner” mindset is a cornerstone of value investing and a stark contrast to the speculative trading that dominates modern markets.

Coined by Buffett's mentor, Benjamin Graham, the Margin of Safety is perhaps the most important investment principle of all. It means buying an asset for significantly less than your estimate of its intrinsic value. This gap between price and value provides a cushion against bad luck, human error, or the wild swings of the market. Berkshire has always practiced this discipline, patiently waiting for opportunities to buy wonderful companies at fair (or, better yet, discounted) prices.

Warren Buffett's annual letters to Berkshire Hathaway shareholders are legendary. Written in clear, witty, and refreshingly honest prose, they are a masterclass in business and investing. In them, Buffett explains his successes and, just as importantly, his mistakes. For anyone serious about managing their own money, these letters are required reading and a source of enduring wisdom.

• Instant Diversification: Buying a single 'B' share gives you a slice of a well-managed, diversified portfolio of high-quality American and global businesses.
• A Free Education: You don't have to own the stock to learn from it. Studying Berkshire's history, investments, and annual letters is one of the best financial educations you can get.
• Think Like an Owner: Adopt the Berkshire mindset. When you buy a stock, think of yourself as buying a small piece of the actual business, because that's what you're doing.
• Patience is a Virtue: Berkshire's success wasn't built overnight. It's the result of decades of patient, disciplined decision-making. Let time and compounding be your allies.