DEFINITION of 'Baby Berkshire'

Baby Berkshire is the 50:1 stock split after the market closed on January 20th, 2010, by Berkshire Hathaway Class B shares. This split made the value of each share much smaller as far as price was concerned. At the market close, Berkshire Class B shares were trading at $3,476. The stock split came as a result of Berkshire's acquisition of Burlington Northern Santa Fe.

The primary difference between Berkshire Hathaway's Class A stock (BRK-A) and Class B stock (BRK-B) is the share price. As of June 2018, Berkshire Hathaway Class A is trading for about $286,700 per share, compared with $190 for the class B shares.

BREAKING DOWN 'Baby Berkshire'

When Berkshire first issued 517,500 shares of Class B shares (BRK-B) in 1996, investors initially could purchase shares for one-30th the price of a Class A share of stock. The 50-to-1 stock split in 2010 sent the ratio to one-1,500th. Class B shares carried correspondingly lower voting rights as well (one-two hundredth of the per-share voting rights.).

Prior to the stock split, Berkshire Class B shares did not have sufficient trading volume to make them eligible for inclusion in the S&P 500 market index. However, lowering the market price through the stock split placed the stock into a more conventional trading range, where it became much more frequently traded. Berkshire Class B shares were added to the S&P 500 on February 12th, 2010, taking the spot previously held by Burlington Northern Santa Fe.

Other Baby Berkshires

The nickname of Baby Berkshire follows the tradition of Baby Bells and Baby Bills. Journalists also use the term "Baby Berkshire" to describe companies with business models that are similar to Berkshire's. These companies include Compass Diversified Holdings, which like Berkshire, is essentially a publicly traded portfolio of operating companies. Other firms include Markel, a holding company for global insurance, reinsurance, and investment operations; Alleghany Corp. that focuses on the insurance business with holdings in property, casualty, surety and fidelity insurance; and diversified holding company Leucadia National.

Leucadia's largest business is investment bank Jefferies Group, which it acquired in 2012. The company also owns the U.S.'s fourth-largest beef processor, National Beef; a 50% partnership with Berkshire in Berkadia, a venture for real estate lending; the 15th-largest U.S. auto dealer, Garcadia; and various other businesses, including restaurants, telecom and real estate. Similar to Berkshire, Leucadia invests heavily in the energy sector. Berkshire acquired MidAmerican Energy in 2000 and has been building its utilities business ever since, while Leucadia has big investments in liquefied natural gas.

RELATED TERMS
  1. Class B Shares

    Class B Shares are a classification of common stock that may ...
  2. Alphabet Stock

    An alphabet stock is an equity share that is tied to a specific ...
  3. Class A Shares

    Class A shares refer to a classification of common stock that ...
  4. Dual-Class Ownership

    Dual-class ownership is a type of share division in which companies ...
  5. Control Stock

    Control stock is equity stock owned by major shareholders of ...
  6. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
Related Articles
  1. Investing

    If You Had Invested Right After Berkshire Hathaway's IPO (BRK.A)

    Learn how much you would now have if you had invested right after Berkshire Hathaway's IPO, and find out the classes of shares that you could invest in.
  2. Investing

    Always Bet On Berkshire Hathaway (And Here's Why)

    With its share price at an all-time high amid talk of a stock market correction, why would anyone buy Berkshire Hathaway shares?
  3. Retirement

    Is Berkshire Hathaway Stock Suitable for Your IRA or Roth IRA? (BRK.B, BRK.A)

    Discover how Warren Buffett's Berkshire Hathaway is structured and if the company is appropriate for individual retirement accounts.
  4. Investing

    Berkshire Hathaway For The Next Decade

    At the current price, Berkshire shares look set for another market-beating decade.
  5. Insights

    Top 4 Institutional Shareholders of Berkshire Hathaway (BRK.A, BRK.B)

    Take a look at which institutions hold the largest stakes of Berkshire Hathaway.
  6. Investing

    Berkshire hits all-time high with price per share $250,000 (BRK-A, BRK-B)

    Warren Buffet is enjoying a post-election surge in Berkshire stock. Will it last?
  7. Investing

    Berkshire Hathaway's 4 Key Financial Ratios (BRK.B, BRK.A)

    Read about the key financial ratios to analyze Berkshire Hathaway. Understand why Buffett likes companies with low debt/equity ratios.
  8. Managing Wealth

    How Warren Buffett made Berkshire Hathaway

    It would be easier to list the industries in which Berkshire Hathaway Inc. doesn’t turn a profit.
  9. Investing

    Why Hedge Fund Managers are Loving Buffett

    Berkshire Hathaway was a favorite among hedge fund managers last year. What is the draw at this particular point in time?
  10. Investing

    Berkshire Hathaway Shifts Strategy Away from Stock Picking

    Warren Buffett seems to be changing his approach, which has traditionally relied on excellent stock picks.
RELATED FAQS
  1. Why doesn't Warren Buffett split Berkshire Hathaway stock?

    Warren Buffet's fundamental approach to investing explains his no-split policy on Berkshire Hathaway stock. Read Answer >>
  2. How does a company decide when it is going to split its stock?

    Learn why some companies decide to split their shares, and understand how they think it helps the stock's liquidity and future ... Read Answer >>
  3. Why are some shares priced in the hundreds or thousands of dollars, while other just ...

    The answer can be found in stock splits - or rather, a lack thereof. The vast majority of public companies opt to use stock ... Read Answer >>
Trading Center