All That Glitters: Examining the Most Expensive Stock on Earth
There Is No Topping Berkshire Hathaway as the Most Expensive Stock on Earth
Savvy stock market investors kick myriad tires when examining a stock: Market capitalization, income, profits, quality of leadership, dividend rate, and more. But ultimately, the true measure of a publicly-traded security is its stock price.
Currently, the priciest stock trading in global markets is Berkshire Hathaway, Inc. (NYSE:BRK), helmed by one of Wall Street’s most-respected stock pickers, Warren Buffett.
Berkshire Hathaway’s Class-A shares are selling for $293,000 per share, as of mid-December, 2017. (Berkshire Hathaway’s Class-B shares sell for much less, about $170 per share.)
(A quick note: the difference between BRK-A shares and BRK-B shares is fairly straightforward, and directly impacts the share price. Class A shares are geared toward deep-pocketed investors who, like Buffett, value long-term portfolio gains, rather than short-term price swings, and are willing to pay a higher share price to get it. Class B share investors provides more flexibility, along with more robust tax benefits.)
On a year-to-date basis, BRK-A has risen from $250,000 per share last January, to $293,000 today, although the stock was trading as low as $205,000 in 2016. Its consensus one-year price target isn’t much higher as its current price, at $300,000 per-share. Buffett has structured Berkshire Hathaway as a holding company for multiple companies it owns, including BNSF, Precision Castparts, Lubrizol, MidAmerican Energy, and GEICO.
Just how impressive is Berkshire Hathaway's share price growth? Try this—if an investor had put $10,000 in BRK (about 808 shares based on the $12 stock price at the time) in 1964, that investor would have gained a whopping $208 million through mid-2017. Or, in other terms, the stock price would have risen 1,972,595 percent from 1964 to the end of 2016.
That's a tough act to follow, although other high-priced stocks have impressive stories to tell, as well.
For example, Berkshire Hathaway is followed on the “most expensive stock list” by Seaboard Corporation (SEB), a multinational Fortune 500 company that deals in the agribusiness sector and transportation. Headquartered in Kansas, SEB is trading at $4,287 per share in mid-December, with a market cap of $4.93 billion. Tracking behind Seaboard is NVR, Inc., a Virginia-based home construction and mortgage giant. It’s trading at $3,392, with a market cap of $12.7 billion.
Berkshire Hathaway may not hold on to its title of “most expensive publically-traded stock" for long. In 2018, Saudi Aramco, Saudi Arabia’s state oil company, is scheduled to go public, with an estimated value of $2 trillion. If and when Saudi Aramco goes public, market analysts say it will become the world’s most expensive publically-traded stock.
Market Capitalization: A Better Measure of Value
While its share price cements Berkshire Hathaway’s status as the most expensive individual stock trading these days, it’s not the largest by market capitalization, which is the value of a publicly-traded company (calculated by multiplying the total number of shares by the present share price).
That honor goes to Apple (AAPL), at $874 billion. Google isn’t too far behind, with a market cap of $714 billion.
Experts say that valuing a publicly-traded company by market cap may be a more effective method of estimating a company’s market value than does stock price. Why? Because market capitalization is generally a more accurate metric than share price, based on simple math and its ability to measure a company’s value and size against other companies.
By and large, market capitalization calibrates what a publicly-traded company is valued at on global financial markets in addition to the stock market’s outlook on a given company’s future prospects, and what amount of money investors are willing to shell out to buy shares of its stock.
But that's not all. Market capitalization can also be deployed to establish rational expectations over a given stock, and also aid in formulating a solid portfolio investment strategy.
While there is no technical threshold for various categories of companies, as measured by market cap, there are some approximate guidelines for investors to follow:
- Large caps are usually companies with market caps over $10 billion
- Mid-cap companies typically range from $2 billion to $10 billion
- Small cap companies usually clock in at under $2 billion in market capitalization
Each category offers its own risks and rewards. large-cap companies, for example, offer low, but steady share price growth, often with decent dividend payments. Small cap companies, conversely, offer investors more room for growth, albeit at higher risk. They also usually don't pay dividends.
Right now, the market cap metric favors companies like Apple and Google. But if share price is the true measuring stick, Warren Buffett and Berkshire Hathaway remain kings of the mountain—for this year, anyway.