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Warren Buffett, CEO of Berkshire Hathaway (NYSE: BRK.B), first made Class B shares available to investors in 1996. Buffett, otherwise known as "The Oracle of Omaha," has a reputation as the most successful value investors in the world, with returns consistently exceeding the S&P 500 index for more than 50 years.
Fortunately, you can capitalise on Berkshire Hathaway’s success by buying and trading the company’s stock. This brief guide gives you everything you need to know about buying Berkshire Hathaway shares from Australia.
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Founded in 1839, with offices in Omaha, NE, Berkshire Hathaway has a legacy that stretches back nearly two centuries. The current CEO, Warren Buffett, has spent the last 50 years as the CEO of the company. Over the years, Buffet developed a reputation as the best value investor in the world.
Berkshire Hathaway has controlling interests in many companies, and it’s a solid blue-chip large-cap company with hundreds of billions in earnings.
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Step 1: Choose a broker
In order to buy Berkshire Hathaway shares, you’ll need to open a trading account with a discount broker. There are dozens of brokers in Australia and hundreds of offshore broker options.
While selecting your broker, compare their product offerings. Not all brokers are the same, and they vary in fees, platforms, and other factors. Here are the key features to look for in a prospective broker.
Rather than having to buy a whole share, many platforms now allow you to buy a fraction of a share. This is very useful when investing in shares that are expensive since you can invest whatever you can afford in any share you want, regardless of its price.
Your broker gives you access to a trading platform, but what these platforms can do differs between brokers. They all offer the basic features of buying and selling shares with multiple order types available. Many brokers also offer you the option of plugging in a third-party trading platform, like Sterling Pro or DAS Trader.
There is no reason for you to pay commissions on your trades since many brokers have moved to a commission-free model. For frequent traders, commissions can take up a large percentage of profits, making it challenging to grow a small account.
Cash and margin accounts
Your broker will offer you a cash or margin account when you sign up. A cash account only lets you trade your available fund balance. You’ll also have to wait for the broker's clearinghouse to process the transaction after you exit your trade in order to see the funds in your account.
A margin account resolves this issue for day traders. By accessing margin accounts, the broker lets you “leverage” your trades by a certain amount. For example, if you had 3x leverage with $300 in your account, you can use it to buy up to $900 worth of shares.
Note that trading on margin is inherently riskier and not advisable for inexperienced traders.
Real-time market data feeds
Price quotes on standard trading platform are delayed by up to 15 minutes. You can get access to real-time market data for asset pricing, but you’ll need to pay an extra fee.
If you’re day trading, then real-time data is critical to your success. Delayed quotes are the better choice for swing traders or value investors.
Step 2: Funding your account
After setting up your broker account, it’s time to deposit some funds and start trading. Most discount brokers accept deposits using bank transfers or debit cards.
However, it’s important to note that it might take the broker some time to credit your trading account with your first deposit.
Step 3: Decide your investment amount
When you fund your trading account, make sure you do it with money you can afford to lose. Depositing everything you have into your trading account is risky. Shares are inherently volatile. What if you have to handle a financial emergency? You don’t want to be forced to sell your shares to fund an emergency, especially if the market is down that day. You could end up missing an opportunity or locking in a loss.
Step 4: Choose between shares or an ETF
Berkshire Hathaway shares are available to purchase on the market as a standalone stock. However, many ETF products hold BRK.B shares, such as the iShares Russell Top 200 Value ETF (IWX), Vanguard S&P 500 ETF (VOO), and SPDR S&P 500 ETF Trust (SPY).
Buying an ETF not only gives you exposure to Berkshire Hathaway shares, but it also gives you ownership of many others that can help to spread out the risk in the ETF.
Step 5: Set up your order
After setting up your account, it’s time to take a look at the different order types available. Below are the four most common order types used in trading.
This order buys Berkshire Hathaway shares at the price quoted when you submit your order. Unfortunately, you could end up filling above your target entry price, otherwise known as “slippage,” as the market could move between order entry and execution.
This order means you are setting the price you are prepared to pay for Berkshire Hathaway's shares. For example, you place a limit order to buy at US$100. The broker can only fill this order at the price you submitted, and not a cent more.
If you’re trading in fast-moving markets, the downside of using limit orders is that the price action might surge past your entry, and the broker doesn’t fill your order, or you only get a partial fill.
This order will sell when the share reaches a certain price. For instance, you set a stop limit order to sell at US$200, and the order only executes at this price.
This risk management tool helps you exit a position automatically. You base your stop loss on your risk tolerance. For example, if you buy the share at US$100, you could set your stop loss to US$90. If the price drops to US$90, the broker automatically sells your position so you don’t risk more than US$10 of downside.
Step 6: Place the order
After opening and funding your account, it’s time to place your first trade. Enter the stock ticker (BRK.B), the number of shares you want to buy, and your market or limit order price. Click the “Buy” button to buy your shares in Berkshire Hathaway.
Step 7: Monitor portfolio performance
Berkshire Hathaway is a large-cap and a slow-moving stock. If you want to trade volatility in price action, it’s best to trade the share on earnings reports when the market has the greatest volatility.
If you’re day trading, it’s best not to leave your trading platform while you are in the trade. Stay at your seat until you either reach your price target or get out of the trade with a loss. Another way to manage this is to put in a stop limit or stop loss order, so you can be assured your trade will execute in the event you are away.
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