Berkshire Hathaway is a large American multinational conglomerate that owns or controls dozens of major businesses across insurance, rail transportation, utilities, manufacturing, finance, and consumer brands. The company operates through three primary segments: insurance, rail and transportation, and manufacturing and services. Instead of chasing short-term earnings, it focuses on long-term compounding by acquiring durable businesses and retaining skilled managers. This explainer clarifies Berkshire Hathaway’s company structure, its two share classes, sources of earnings, how value is created, and how retail investors can access exposure.
What Berkshire Hathaway Is and How It Operates
Berkshire Hathaway owns or has significant positions in many well-known businesses and serves millions of customers globally. Its diversified holdings help smooth results across economic cycles, because different businesses perform differently under varying conditions. Three lines of business drive most activity: insurance provides float used for investing; rail and transportation move goods efficiently and charge stable, inflation-resistant rates; and manufacturing and services produce goods, provide capital, and support consumer needs. The company is known for disciplined capital allocation, long-term ownership, and a structure designed to compound value over decades rather than chase quarterly targets.
Berkshire Hathaway Share Classes Explained
The firm’s shares fall into two main classes, each with distinct rights and uses. Class A shares (ticker BRK.A) typically have high price and carry full voting rights, allowing holders to participate in governance decisions. Class B shares (ticker BRK.B) have different voting rights and are priced lower to improve liquidity and broaden ownership. Understanding the differences helps investors choose the share type that aligns with their goals, whether they prioritize voting influence, price per share, or accessibility.
Voting Rights and Economic Rights of Each Class
| Attribute | Verified Detail | Source Type |
|---|---|---|
| Class A (BRK.A) | Full voting rights; higher price per share | Company filings, public disclosures |
| Class B (BRK.B) | Limited voting rights; approximately 1/1,500th the voting power of Class A; lower price per share | Company filings, public disclosures |
| Conversion ratio | Each Class B share can be exchanged for a set fraction of a Class A share | Company filings, public disclosures |
| Earnings and cash flow | Both classes represent claims on the same underlying operating businesses and earnings | Company filings, public disclosures |
| Use cases | Class A favored by large investors and foundations; Class B accessible to smaller investors | Market practice, broker documentation |
Class A shares grant full voting rights on major corporate decisions, board elections, and governance matters, while Class B shares carry proportionally less voting power, typically at a ratio that makes Class B votes significantly smaller than Class A votes. Convertibility allows holders of Class B shares to exchange them for Class A shares at a set ratio, providing flexibility. Economically, both classes represent claims on the same underlying portfolio of operating businesses, earnings, and cash flows, so ownership class does not change the intrinsic business performance, only governance and share mechanics.
How Berkshire Generates Earnings and Value
Berkshire’s earnings come from three primary sources: underwriting profits and investment income in insurance, stable cash flows from transportation and utility operations, and operating earnings from manufacturing, energy, and service businesses. Investment gains on a large equity portfolio, including ownership stakes in public companies and long-term holdings, also contribute meaningfully to book value. Cash is allocated across reinvestment in existing businesses, acquisitions that create meaningful competitive advantages, and share repurchases when market conditions and price thresholds align. This multi-source earnings base underpins long-term book value growth rather than reliance on any single industry or product line.
Operating Segments and Earnings Drivers
- Insurance: Collects premiums, invests float, and aims for underwriting profits that generate low-cost capital
- Rail and transportation: High-quality, inflation-resistant cash flows from efficient freight movement
- Manufacturing and services: Diversified product and supply businesses serving commercial and consumer needs
- Investments: Equity holdings and fixed-income positions that produce dividends, interest, and appreciation
- Capital allocation: Strategic reinvestment, acquisitions, dividends to insurers, and selective buybacks
These segments together create a durable earnings profile, supported by strong underwriting discipline and long-term investing. Because results vary across industries and cycles, Berkshire historically experiences periods of higher and slower earnings growth, reflecting macroeconomic conditions and portfolio performance rather than a single linear trajectory.
Ownership Structure and Voting Influence
Berkshire is widely held by institutional investors, long-term funds, and individual shareholders. The company has no controlling shareholder in the typical sense, and governance decisions are made by the board and, in certain situations, class B shareholders vote alongside Class A owners on matters requiring shareholder approval. Large positions held by endowments, pension funds, and investment firms reflect confidence in long-term compounding, but ownership is dispersed, and no single entity can dictate board composition or strategy unilaterally. This structure supports independent decision-making and continuity in capital allocation.
Institutional and Retail Ownership Comparison
| Attribute | Typical Institutional Exposure | Typical Retail Exposure |
|---|---|---|
| Common approach | Long-term buy-and-hold, large block trades | Brokerage accounts, smaller increments, diversified funds |
| Voting impact | Greater capacity to engage and influence board decisions | Often indirect through funds or collective voting in Class B |
| Preferred share class | Class A for direct control and large positions | Class B for lower price and sufficient exposure |
Institutional holders often prefer Class A shares because they can exercise meaningful influence on corporate governance, whereas many retail investors access Berkshire through Class B shares or funds that hold either class. Both share classes participate in the same economic engine, but voting influence varies by share type and position size.
Accessing Berkshire as an Investor
Direct ownership of Berkshire Hathaway is straightforward but carries considerations due to share price and voting mechanics. Class A shares trade at a premium and provide full governance rights, making them suitable for investors who want direct influence and have capital to deploy. Class B shares are more affordable and liquid, allowing smaller investors to gain exposure with limited voting impact. Alternatively, mutual funds and exchange-traded funds that hold Berkshire stock offer diversified, lower-cost access, though with reduced or no direct voting rights. Investors should weigh price, liquidity, voting objectives, and risk management when choosing how to participate.
Practical Ways to Invest
- Buy Class A shares directly through a brokerage if you seek full voting rights and have sufficient capital.
- Purchase Class B shares for lower-priced exposure and acceptable voting power for most retail strategies.
- Use a diversified fund that holds Berkshire to gain indirect exposure with professional management.
- Consider dollar-cost averaging and long-term holding periods to align with Berkshire’s compounding profile.
- Review broker documentation and tax implications before executing trades or changing positions.
Because Berkshire operates across many sectors and holds a broad portfolio, its performance reflects diverse business results rather than a single product or trend. This diversification can help manage risk, but investors should still align allocations with their broader goals and time horizons.