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.