Bull and Bear

Dividends and Splits

 

Case Study:
Berkshire Hathaway (BRKa)

 

Berkshire Hathaway (BRK) was created in 1955 from the merger of Berkshire Cotton Manufacturing and Hathaway Manufacturing. The company was aquired in 1965 by Warren Buffet. With the textile industry in what appeared to be a permanent slump, Buffet used Berkhire Hathaway as a base from which to acquire a wide variety of companies in other industries. He began by buying the National Indemnity and the National Fire & Marine Insurance Companies, both of Omaha, Nebraska. Thereafter BRK acquired, or acquired a significant share of, companies such as See' Candy, Buffalo News, Blue Chip Stamps, Nebraska Furniture, Borsheim's, Fechheimer Brother's, Scot & Fetzer, H.H. Brown Shoe, Dexter Shoe, Wescoe Financial, The Washington Post, GEICO (Government Employees Insurance Company), Capital Cities/ABC, and Coca-Cola. BRK also held significant numbers of shares in Gillete, Wells Fargo, General Dynamics, and the Federal Home Loan Association.

Berkshire Hathaway has a zero tolerance policy on stock splits. Through all the years of growth and acquisition Berkshire Hathaway shares have never split. The price hit a high of $80,000 per share in 1998. This price per share put out out of the reach of most investors.

Buffet was unwilling to abandon his no split policy so he created a new class of shares instead. The original Berkshire Hathaway (BRK) became Berkshire Hathaway Class A shares (BRKa or BRK.A) and the company issued new Berkshire Hathaway Class B shares (BRKb or BRK.B) at a much more affordable $1000 per share.

 

 Lesson 4.10.1: Berkshire Hathaway (BRKa)  3] Going Public
5] The Path to the Big Board