Savvy stock market investors kick many tires when sizing up a stock. They look at market capitalization, income, profits, quality of leadership, and dividend rate. But in the end, the true measure of publicly traded security is its stock price.
What's the Most Expensive Stock?
Right now, the priciest stock trading in global markets is Berkshire Hathaway, Inc. (BRK). The company is helmed by one of Wall Street’s most respected stock pickers, Warren Buffett. Berkshire Hathaway’s Class-A shares reached a high of $445,000 per share in May 2021. (Their Class-B shares sold for much less, with a high of about $295 per share.)
The difference between BRK-A shares and BRK-B shares is fairly straightforward. It also directly impacts the share price. Class A shares are geared toward wealthy investors who, like Buffett, value long-term gains, rather than short-term price swings. These investors are willing to pay a higher share price to get a higher payoff in the long run. Class B shares provide more flexibility. These shares also offer more robust tax benefits.
On a year-to-date basis, in mid-August 2021, BRK-A had risen over $89,000 from its January 4 price of $343,525. Its consensus one-year price target was about $129,000 higher than the current price. Buffett has structured Berkshire Hathaway as a holding company for other companies. These include BNSF, Precision Castparts, Lubrizol, MidAmerican Energy, and GEICO.
Berkshire Hathaway's share price growth is impressive. For instance, let's say that you had invested $10,000 in BRK—about 808 shares based on the $12.37 stock price at the time—in 1964. You would have gained a whopping $208 million through mid-2017. In other terms, the stock price would have risen 1,972,595% from 1964 to the end of 2016. That's a tough act to follow. But other high-priced stocks also have impressive stories, too.
Berkshire Hathaway shares the “most expensive stock list” with Lindt & Sprüngli AG (LISN.SW), a Swiss multinational chocolatier and confectionery company. In August 2021, the company traded at around 104,000 Swiss francs per share (more than $113,000 USD), with a 24.8 billion franc market cap.
Another member of this group is NVR, Inc. (NVR), a homebuilding and mortgage company. NVR traded at more than $5,200 per share in August 2021. The company's market cap exceeded $18.7 billion.
Market Capitalization: A Better Measure of Value
While its share price cements Berkshire Hathaway’s status as the most expensive stock trading these days, it’s not the largest by market capitalization. This measure is the value of a publicly traded company. You can figure out market cap by multiplying the total number of shares by the present share price.
The holder of this top slot changes regularly. Contenders include Microsoft Corp (MSFT), Apple (AAPL), and Amazon (AMZN).
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 by its stock price.
Market capitalization is generally a more accurate metric than the 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 the value of a publicly traded company on global financial markets. It also shows the stock market’s outlook on a given company’s prospects. Market cap tells you how much money investors are willing to pay for shares of a company's stock.
Market capitalization can also set rational expectations over a given stock. Also, this metric can help you create 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 risks and rewards. For example, large-cap companies offer low but steady share price growth, often with decent dividend payments. Small-cap companies offer more room for growth, but at higher risk. They also usually don't pay dividends.
The market cap metric favors companies such as Apple and Google. But if a share price is a true measure, Warren Buffett and Berkshire Hathaway remain the leaders.