Poll: A's vs B's

Stocks A to Z
1

Converting A shares to B shares is apparently common. What about converting B’s to A’s?

I currently have a sufficient number of B shares in a Fidelity IRA account to convert into one A share. Am considering selling the B’s and using the proceeds to buy one A share.

No tax implication or transaction fees (as far as I know).

Reasons (in order of importance):

  1. Am less likely to day trade the A vs the B’s.
  2. A’s are becoming more rare comparatively to the B’s.
  3. Seems Buffett has a preference for the A’s. Maybe I should too?
  4. Special kind of cool factor owning “A” shares (small club and getting smaller).

Questions:
Can anyone imagine a situation where the A’s trade at a significant premium to the B’s?
Am considering doing this in a Fido account. Can I make the trade on line without human intervention?
When I bought A’s in my Schwab account, I was required to call a trading specialist to buy the A’s…

Thanks for your thoughts in advance.

Lot’s of questions. If you’d prefer to just vote, even if if you think it’s a dumb idea, you can do so anonymously below.

  • Stand Pat - Keep the B’s
  • Convert the B’s to the A.
  • Dumb Idea

0 voters

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2

What about converting B’s to A’s?

Because it can’t be done?

The only way is to sell your B shares and buy an A share on the open market.
For most, the tax consequence is a prohibitive expense.
Commissions are pretty negligible these days.

Jim

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I did this because I thought it would be cool to own an A share. It was in an IRA account, so no tax penalties. When something happened that I wanted to buy some Berkshire options, or diversify a little to cash or convert part of my traditional IRA, there was my A share sitting all fat and undividable. I then had to sell way more Berkshire to make the portfolio change. I think it was a dumb idea in retrospect. It was also something like 1/4 of my networth, so YMMV.

I don’t envision a scenario where the A shares would trade at a considerable premium. I expect them to carry a 1% or so premium. Eventually I expect them to see sow little trading that last price will be a poor reflection of what you can sell them for. Google’s lower-voting shares trade at a premium to their voting shares because Alphabet repurchases only the non-voting shares. I don’t expect that to happen with Berkshire shares.

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4

Your reason #1 has worked for me. Not that I would day trade BRK, but having a big A share value has helped me resist the urge to “cut back a bit, lock in some gains”, all evil thoughts that I would have regretted.

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5

I’d consider making the switch if the premium is negligible as at present since it sounds like you’ll be sitting on the share (plus maybe other BRK shares) for the long term.

Presumably you have other assets both in the IRA and elsewhere to satisfy your trading needs. If not, you can always sell a fractional amount of the share. The only problem with that is that fractional share sales must be at market price with Fidelity.

Also, back in the 2008-09 crash the A shares traded at a premium of a few per cent over the B shares and it was possible to switch into more than 30 B shares (there were 30 Bs to an A at the time) and then back to A when the market volatility calmed down. So there can be situations where the premium gets mildly out of line and it can work to your advantage.

Hope this helps.

1 Like
6

Thanks everyone for the poll responses and thoughtful replies, including the 12 that thought my idea was dumb.

“Your reason #1 has worked for me. Not that I would day trade BRK, but having a big A share value has helped me resist the urge to “cut back a bit, lock in some gains”, all evil thoughts that I would have regretted.”

My thinking as well.

" I’d consider making the switch if the premium is negligible as at present since it sounds like you’ll be sitting on the share (plus maybe other BRK shares) for the long term.

Yes, this is the case.

"Presumably you have other assets both in the IRA and elsewhere to satisfy your trading needs. If not, you can always sell a fractional amount of the share. The only problem with that is that fractional share sales must be at market price with Fidelity.

Correct. I have other stocks (BRK/B and others available for sale as well as cash in different accounts if need be.

“Also, back in the 2008-09 crash the A shares traded at a premium of a few per cent over the B shares and it was possible to switch into more than 30 B shares (there were 30 Bs to an A at the time) and then back to A when the market volatility calmed down. So there can be situations where the premium gets mildly out of line and it can work to your advantage.”

Was not aware of that but wasn’t in a position to buy A’s in 2008. Thanks.

"Hope this helps.

Yes, it did.

Well, despite the overwhelming advice not to trade, including 37% who thought it was “dumb idea”, I chose confirmation bias and pulled the trigger this afternoon. Who am I to listen to good advice?

Sold 1550 B’s at $309.00 and bought one more A for $464,000.

Fidelity allowed me to make the trade without human assistance which wasn’t the case when I bought A’s previously on Schwab.

Hopefully I’ll be less likely to trade the A’s. It’s looking like the market could get even more choppy.

Thanks to those who replied and responded to the poll.

1 Like