The stock market continued to move higher on Friday, allowing both the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) to reach new records. The Nasdaq Composite (NASDAQINDEX:^IXIC) is approaching its own high-water mark, as optimism about tech stocks played a key role in today’s advances.
Warren Buffett remains one of the most talked-about investors in the world, and today, his Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) celebrated a milestone. Buffett would be the first to tell you that it was completely meaningless from an investing standpoint, but it nevertheless represents the latest achievement in an illustrious career for the Omaha native.
Flipping the Berkshire stock odometer one more time
Berkshire Hathaway finished higher by 1% on the day. Its Class A shares, which are the highest-price shares in the stock market, closed right at $400,000 — the first time it has finished a trading session at or above that level.
Berkshire had poked above the $400,000 mark on an intraday basis on a few occasions during the past month. However, each time, traders had pushed it back lower by the end of the day.
Even though Berkshire’s Class A stock has the highest price tag on a per-share basis, Berkshire isn’t the most valuable company. The disparity stems from the fact that Berkshire has only about 640,000 Class A shares outstanding. The company has a much larger number of Class B shares — about 1.34 billion at last count — each of which represents just 1/1,500th of the economic interest of their Class A counterparts.
An amazing ride
It’s hard to believe, but there was a time when Berkshire’s Class A shares traded at what look like ordinary prices. Buffett first decided to obtain a controlling interest in Berkshire back in 1964 when the company offered him $11.38 per share rather than $11.50. It took 13 years for the stock to hit $100, and bullish conditions in the 1980s lifted the share price to $1,000 by 1983 and $10,000 in 1992.
The tech boom of the 1990s raised concerns that Buffett had lost his way, falling behind the times and remaining uninvolved in a key driver of stock market growth. Those opinions changed during the tech bust in the early 2000s, but it still took Berkshire until 2006 before Class A shares hit the $100,000 mark for the first time. The first move above $200,000 came in 2014, and the $300,000 milestone fell in late 2017.
Why other stocks don’t look like Berkshire
Yet investors shouldn’t get the idea that just because Berkshire has the highest share price of all, other stocks haven’t produced equally impressive performance. Most companies with long histories of successful growth have made corporate adjustments to their share prices to be friendlier to shareholders.
Stock splits boost the number of outstanding shares, making each worth proportionally less. Dividend payments return value to shareholders, and those who reinvest those dividends to obtain additional shares also benefit from the compounding that results.
Buffett turned 90 last year, and it’ll be difficult for anyone to match his performance over his long career. Berkshire stands as a reminder of how powerful the stock market is as a wealth-generating machine, and the insurance conglomerate isn’t done yet in its quest to produce value for shareholders.
